According to this article in the Chicago Tribune today, Middleby Corp.’s shareholders rejected its say on pay vote.,0,1019969.story


If you read the Wall Street Journal article, For Proxy Advisers, Influence Wanes (May 22, 2013), you might think that both Institutional Shareholder Services (ISS) and Glass, Lewis & Co. (Glass Lewis) are on the ropes. There’s even a quote from Glass Lewis’ VP of proxy research, David Eaton, that seems to buttress that conclusion:

“Our power is probably shrinking a little bit.”

The article discusses how some of the larger mutual funds and money managers, like BlackRock and Vanguard Group Inc., have teams that handle more of the leg work that used to be in the proxy advisors’ wheelhouse. But these large institutional shareholders still subscribe to the ISS and/or Glass Lewis proxy reports. In many cases the ISS and Glass Lewis proxy report are viewed as background research on the company, which then may be supplemented by the institutional shareholders’ staff (which are generally too small for them to handle all the research themselves in a cost efficient manner).

The article cites a 2002 study that found that a negative ISS vote recommendation on management proposals influenced from 13.6% to 20.6% of the vote. Additionally, with the passage of the Dodd-Frank Act with its say-on-pay requirements, the influence of proxy advisors has grown. According to a 2012 study by the Conference Board, about 70% of 110 large and midsize companies indicated that their pay practices were influenced by proxy advisory firm policies.

Glass Lewis and ISS indicated that they are recommending against fewer say-on-pay votes this year and fewer have actually failed.  According to Broc Romanek’s blog today on, there have been only 23 say on pay votes that failed so far int eh 2013 proxy season.

The conclusion I reach?  A bit different than the article: proxy advisors’ influence is still going strong.  Why? Because at this point many large and midsize companies are either  incorporating the proxy advisors’ policies regarding pay practices into their pay designs up-front or at least considering them during the design phase.  Therefore, more companies are either complying with the proxy advisors’ policies or are aware of anything done outside the lines of those policies and can then do a better job of explaining the rationale for such compensation actions to their shareholders.

So while it might appear from a pure vote perspective that the influence of the proxy advisory firms is waning (which I question a bit given what I’ve seen in the context of equity plan proposals for some time, see the white paper Reid Pearson of Alliance Advisors and I published earlier this year on the topic which shows that failed equity plan proposals have stayed at about the same level over the past five years, Equity Plan Proposal Failures: 2007-2012), I believe their influence on executive compensation at public companies is actually growing.

WSJ article:

Equity Plan Propsal Failures: 2007-2012:


The law firm Katten Muchin Rosenman LLP released an Advisory, A New Wave of Say-on-Pay and Executive Compensation Proxy Litigation, on October 29, 2012 that warns of changing tactics of the plaintiffs’ shareholder bar.

Since the say-on-pay lawsuits have been largely unsuccessful, thanks to the specific language in the Dodd-Frank Act, the plaintiffs’ shareholder bars’ new tactic is “filing class action lawsuits against companies before the shareholder meeting to enjoin the say-on-pay vote based on alleged incomplete and misleading proxy disclosures. They also challenge disclosures in connection with any required vote in amending executive equity compensation plans, such as increasing the number of shares available for issuance.”

This is a very troubling development and one that could have repercussions to almost any management proposal placed on a proxy statement for a shareholder vote. I’ve learned that a few companies have already seen similar lawsuits concerning their equity plan proposals.


On October 9, 2012, Bloomberg BNA’s Pension & Benefits Daily published this article by Exequity’s Ed Hauder. The article looks at companies whose say-on-pay (SOP) votes failed in 2011 and have reported their SOP votes for 2012, some of the actions these and other companies with failed SOP votes can take to turn things around, as well as the success this group of companies had with their 2012 SOP votes, and includes charts looking at 2011 and 2012 SOP votes, change in CEO total compensation, and TSR and percentile rank against companies’ GICS groups.


On Tuesday, October 9, 2012, Ed Hauder, Senior Advisor at Exequity LLP, will be participate in two panels during the Say-on-Pay Workshop: 9th Annual Executive Compensation Conference in New Orleans . Ed will participate in these panels:

  • How to Work with the Proxy Advisors: Navigating the Say-on-Pay Minefield
  • Say-on-Pay: How to Tackle All the Hot Button Issues

For more information, please see the conference website which includes sign-up links and the agenda and gives details about the host hotel for the conference in New Orleans. The conference website is:


So far in the 2012 proxy season (generally over now for calendar-year companies), 55 companies have reported failed SOP votes, a bit higher than the 44 SOP failures I reported for all of 2011.  Here’s the list of failed SOP votes for 2012 as of July 11, 2012:


So far in 2012, 49 companies have reported failed SOP votes, now slightly higher than the 44 SOP failures I reported for all of 2011.  Here’s the list of failed SOP votes for 2012 as of June 12, 2012:


In looking at the companies that had “failed” SOP votes in 2011, it now looks like five (5)  had their SOP votes “fail” in 2012 as well:

  • Cooper Industries
  • Hercules Offshore
  • Kilroy Realty
  • Nabors Industries
  • Tutor Perini

Support for several other SOP votes at companies with 2011 SOP failures have come in under 70%:

  •  Cogent Communications Group, Inc. – 68.45%
  • Janus Capital Group Inc. – 61.38%
  • Nutri System – 66.23%
  • Weatherford International – 54.49%

All of these companies will come under closer scrutiny by ISS next year as a result.  Those five (5) companies with 2 successive years of failed SOP votes (depending on how you count abstentions), will have a difficult time with their shareholders and may have to consider making some substantial changes in order to turn things around next year.

The chart below tracks the votes that have been recorded so far at companies that had SOP votes fail to secure a majority of the votes in their 2011 SOP votes (click on the graphic to expand it to readable size).


The chart below details the SOP failures in 2012 through May 15, 2012 (click on the table to magnify). I picked up one failure from early int he season (Actuant) and added a few more since last week.  In total, I’ve tracked 33 SOP failures so far in 2012, about the same as the 2011 proxy season.


Proxy Voting Fact Sheet

On May 25, 2012, in Say on Pay, Vote Results, by Ed Hauder

The Conference Board and FactSet Research Systems Inc. just released a Proxy Voting Fact Sheet that gives a good overview of the 2012 proxy season through April 2012. The publication looks at shareholder proposals and details the voting results on Management Say on Pay proposals and includes the outcomes on these votes.  The Proxy Voting Fact Sheet is available at: (an account or registration is required).