IN THIS ISSUE
THIS REPORT CAN BE ACCESSED AT
1,971 DISCLOSURES
PAGES 1-5
SEMLERBROSSY.COM/SAYONPAY
2,028 VOTE RESULTS
PAGES 6-8
513 VOTE RESULTS
PAGE 9
15,768 VOTE RESULTS
PAGE 10
144 VOTE RESULTS
PAGE 11-12
1
1,715 Russel l 3000 companies and 387 S&P 500 companies have d isc losed a CEO Pay Rat io and reported Say on Pay results in 2018. The relat ionship between the two numbers is relat ively weak for the Russel l 3000, where average Say on Pay support for companies with a Rat io above the index’s median is 89.2%, compared to 91.7% for those with a below median Rat io. The same relat ionship has been stronger among the S&P 500 companies, where average Say on Pay support is 86.7% for companies that d isc lose a Rat io above the median, compared to 91.5% for those with a below median Rat io.
The median and 75 th percent i le Rat ios of the S&P 500 are more than two t imes the median and 75 th
percent i le Rat ios of the Russel l 3000
Median employee compensat ion for the S&P 500 and Russel l 3000 are with in 10% of each other at var ious percent i les unt i l the 90 th percent i le
The Russell 3000 distribution tails off near 300:1 while the S&P 500 distribution tails off near 500:1
73x109x
166x
303x
550x
16x 34x 72x148x
323x
0x
100x
200x
300x
400x
500x
600x
10 P 25 P 50 P 75 P 90 P
S&P 500
(n=415)
Russell 3000
(n=1,971)
$24
$48
$68
$104
$138
$24 $43$63
$99
$154
$0
$50
$100
$150
$200
10 P 25 P 50 P 75 P 90 P
Tho
usa
nd
s S&P 500
(n=415)
Russell 3000
(n=1,971)
Russell 3000 50th P: 72x75th P: 148x
S&P 50050th P: 166x 75th P: 303x 90th P: 550x
90th P: 323x
0%
5%
10%
15%
20%
25%
0x 100x 200x 300x 400x 500x 600x 700x 800x
Pe
rce
nta
ge o
f Co
mp
anie
s
CEO Pay Ratio
Russell 3000 S&P 500
2
S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s , S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e
2 6 , 2 0 1 7 . F i n a n c i a l d a t a p r o v i d e r c h a n g e d f r o m F a c t S e t t o S & P C a p i t a l I Q a s o f J u l y 2 0 1 8 .
* E xc l u d e s c o mp a n i e s w i t h n o e mp l o y e e s , n o C E O , o r C E O s w i t h n o c o mp e n s a t i o n .
• The CEO Pay Ratio is more heavily influenced by the magnitude and variance in CEO compensation than by the median employee compensation
• Company revenue, a primary determinant of CEO compensation, has a direct correlation with the CEO Pay Ratio
• CEO compensation scales as company size increases, while median employee compensation has little correlation with company size
• The CEO Pay Ratio is inversely correlated with median employee compensation – companies with bottom quartile median employee compensation have significantly higher Ratios
25P: $2.4M $43.1K
50P: $4.7M$63.1K
75P: $8.6M
$99.1K
10P: $1.2M
90P: $14.4M
$24.1K
$153.6K
CEO Compensation Median Emp. Compensation
27x64x 88x
144x213x
0x
100x
200x
300x
400x
< $0.5Bn = 581
$0.5-$1.5Bn = 492
$1.5-$3.5Bn = 346
$3.5-$10Bn = 310
> $10Bn = 242
115x155x 156x
214x276x
0x
100x
200x
300x
400x
< $5Bn = 112
$5-$10Bn = 98
$10-$15Bn = 72
$15-$30Bn = 60
> $30Bn = 73
186x
80x 73x 64x37x0x
100x
200x
300x
400x
< $40Kn = 428
$40-$55Kn = 353
$55-$70Kn = 319
$70-$100Kn = 387
> $100Kn = 484
396x
198x 185x123x 91x
0x
100x
200x
300x
400x
< $50Kn = 114
$50-$65Kn = 82
$65-$90Kn = 82
$90-$120Kn = 62
> $120Kn = 75
3
S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s , S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e
2 6 , 2 0 1 7 . F i n a n c i a l d a t a p r o v i d e r c h a n g e d f r o m F a c t S e t t o S & P C a p i t a l I Q a s o f J u l y 2 0 1 8 .
* E xc l u d e s c o mp a n i e s w i t h n o e mp l o y e e s , n o C E O , o r C E O s w i t h n o c o mp e n s a t i o n .
• The CEO Pay Ratio and CEO compensation show a positive relationship, while the Ratio and median employee compensation show an inverse and weak relationship
• There is a particularly strong relationship between the CEO Pay Ratio and CEO compensation for Ratios below 100:1
R² = 0.244
$0
$5
$10
$15
$20
$25
$30
$35
0x 50x 100x 150x 200x 250x 300x 350x 400x 450x 500x
CEO
Co
mp
. ($M
M)
CEO Pay Ratio
R² = 0.173
$0
$50
$100
$150
$200
$250
$300
0x 50x 100x 150x 200x 250x 300x 350x 400x 450x 500x
Me
dia
n E
mp
loye
e C
om
p. (
$000
s)
CEO Pay Ratio
4
S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s . S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e
2 6 , 2 0 1 7 . F i n a n c i a l d a t a p r o v i d e r c h a n g e d f r o m F a c t S e t t o S & P C a p i t a l I Q a s o f J u l y 2 0 1 8 .
* E xc l u d e s c o mp a n i e s w i t h n o e mp l o y e e s , n o C E O , o r C E O s w i t h n o c o mp e n s a t i o n .
42x 47x 51x 56x 65x78x 80x 82x 89x
149x
199x
0x
100x
200x
300x
400x
500x
600x
700x
800x
Financials
n=365
Utilities
n=62
Health Care
n=274
Real Estate
n=142
Energy
n=102
Information
Technology
n=230
Industrials
n=297
Comm.
Services
n=84
Materials
n=97
Consumer
Staples
n=66
Consumer
Discretionary
n=252
• CEO Pay Ratios differ greatly by sector among companies in both studied indices
• CEO pay typically scales more proportionately than median employee compensation as company size increases, illustrated by higherCEO Pay Ratios among the S&P 500 relative to the Russell 3000 across nearly all sectors
• The composition of a company’s workforce and the use of seasonal or part-time employees are primary drivers of high CEO Pay Ratios at the 75th and 90th percentiles in the Consumer Staples and Consumer Discretionary sectors
• Unionized workforces at Utilities companies leads to high median employee pay, which drives the sector’s low CEO Pay Ratios
1355:1
951:1
25P
Median
75P
10P
90P
Legend
25P
Median
75P
10P
90P
Legend
1Reclassification of GICS sectors in September 2018 resulted in a shift of companies between the IT, consumer discretionary, and communication services (formerly telecommunication services) sectors.
164x
94x
215x
117x 100x
145x169x
285x
158x
276x
449x
0x
100x
200x
300x
400x
500x
600x
700x
800x
Financials
n=58
Utilities
n=28
Health Care
n=53
Real Estate
n=30
Energy
n=27
Information
Technology
n=41
Industrials
n=58
Comm.
Services
n=18
Materials
n=20
Consumer
Staples
n=23
Consumer
Discretionary
n=59
5
S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s . S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e
2 6 , 2 0 1 7 . F i n a n c i a l d a t a p r o v i d e r c h a n g e d f r o m F a c t S e t t o S & P C a p i t a l I Q a s o f J u l y 2 0 1 8 .
* E xc l u d e s c o mp a n i e s w i t h n o e mp l o y e e s , n o C E O , o r C E O s w i t h n o c o mp e n s a t i o n .
• The Pay Ratio has an inverse relationship with Say on Pay but is not a primary driver of Say on Pay results
• The inverse relationship between the Pay Ratio and Say on Pay is stronger among the S&P 500 than the Russell 3000. Vote support is almost the same for the three lowest Russell 3000 Pay Ratio groups
• While only 21% of the Russell 3000 discloses a Ratio above 175:1, those companies make up 45% of all Say on Pay vote failures
< 50x26%
50x - 100x16%
100x - 175x14%
175x - 250x12%
> 250x33%
Failed Say onPay (n=43)
< 50x36%
50x - 100x26%
100x - 175x17%
175x - 250x7%
> 250x14%
All Companies(n=1,715)
91.5% 91.6% 91.2% 87.5%
17.8% 19.8% 18.5%
27.1%
Ratio < 40x
n = 480
40x - 75x
n = 390
75x - 150x
n = 415
> 150x
n = 430
Avg SOP Vote Companies with SOP < 90%
93.6% 91.9% 89.9% 87.6%
13.8% 14.9%20.4%
26.2%
Ratio < 100xn = 91
100x - 175xn = 115
175x - 300xn = 85
> 300xn = 96
Avg SOP Vote Companies with SOP < 90%
14%
11%
11%
18%
Ratio < 40xn = 480
40x - 75xn = 390
75x - 150xn = 415
Ratio > 150xn = 430
5%
8%
11%
16%
Ratio < 100xn = 91
100x - 175xn = 115
175x - 300xn = 85
Ratio > 300xn = 96
6
55 Russell 3000 companies (2.7%) have failed Say on Pay in 2018. Four companies have failed since our last report – Black Box Corporation, Envision Healthcare Corporation, RAIT Financial Trust, and Vista Outdoor.
• The failure rate (2.7%) has increased 4 basis points since the last report and is higher than the year-end failure rates in the previous two years
• The average vote result (90.3%) is the lowest since 2012
• Nearly one-third of the S&P 500 has received vote support below 70% at least once since 2011
• 8% of Russell 3000 and 7% of S&P 500 constituents have failed Say on Pay at least once
7%
32%
66%
8%
25%
54%
Below 50% Support at Least Once
Below 70% Support at Least Once
Below 90% Support at Least Once
Vote results for current S&P 500
and Russell 3000 constituents
S&P 500 Russell 3000
72% 73% 76% 75% 76% 75% 78% 76%
21% 19% 15% 17% 16% 17% 15% 16%
6% 6% 6% 6% 6% 6% 5% 6%
1.4% 2.6% 2.5% 2.4% 2.8% 1.7% 1.5% 2.7%
0%
25%
50%
75%
100%
2011Avg=90.9%
n = 2,660
201289.8%
2,226
201390.6%
2,253
201490.9%
2,545
201590.8%
2,157
201690.9%
2,117
201791.7%
2,357
201890.3%
2,028
Below 50%
50 - 70%
70 - 90%
90%+
PERCENTAPPROVAL
7
S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s . S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e
2 6 , 2 0 1 7 . F i n a n c i a l d a t a p r o v i d e r c h a n g e d f r o m F a c t S e t t o S & P C a p i t a l I Q a s o f J u l y 2 0 1 8 .
• Say on Pay vote results are 31% lower at companies that receive an ISS “Against” recommendation
• The difference in vote results for companies receiving “For” and “Against” in 2018 (31%) is at the high end of the historical average of 25-30%
• The slightly wider gap this year could be an indication of increased alignment of institutional shareholder voting with ISS recommendations
• 273 companies (14.2%) received one “For” and one “Against” recommendation from ISS during the last two years
• The “Against” recommendation rate in 2018 (13.9%) is 170 basis points higher than the 2017 rate (12.2%)
• Only 5% of companies have received ISS “Against” recommendations in each of the last two years. This is 13 basis points higher than the last report
“For” “Against”
“For”81% of companies
(n=1555) 8% of companies
(n=155)
“Against”6% of companies
(n=118)5% of companies
(n=98)
2018 Rec.
2017 Rec.
1Reclassification of GICS sectors in September 2018 resulted in a shift of companies between the IT, consumer discretionary, and communication services (formerly telecommunication services) sectors.
95%
64%
0%
25%
50%
75%
100%
ISS For(n = 1,746)
ISS Against(n = 282)
2011 2018
86% 84% 79% 77% 74% 76% 71% 76% 72% 70% 60%
9% 11% 16% 15% 18% 13% 19% 13% 18% 17% 24%
5% 4% 1% 6% 5% 8% 7% 8% 7% 9% 9%
2% 3% 2% 3% 3% 3% 3% 3% 4% 7%
0%
25%
50%
75%
100%
Utilities
n = 66
Avg = 92.8%
Industrials
303
92.4%
Consumer
Staples
68
91.8%
Financials
371
90.9%
Consumer
Discretionary
261
90.3%
Materials
106
90.1%
Health Care
277
89.7%
Real Estate
153
89.2%
Information
Technology
250
89.2%
Energy
106
88.0%
Comm.
Services
67
85.7%
90%+ 70 - 90% 50 - 70% Below 50%
8
2018 Failed Say on Pay Vote Results1
Russell 3000, n=55
Likely Causes of Votes Under 50%
Number Pay and Problematic Rigor of Shareholder Non- Special
Say on Pay Vote Results of Performance Pay Performance Outreach and Performance Awards/ Mega- Benchmarking
Company 2018 q 2017 YOY Failures Relation Practices Goals Disclosure Based Equity Grants Practices
Molina Healthcare, Inc. 50% 79% -29% 1 X X
Waterstone Financial, Inc. 50% 86% -36% 1 X X
Cogent Communications Holdings, Inc. 50% 66% -17% 5 X X X
Vista Outdoor Inc. 50% 97% -48% 1 X X
Fluidigm Corporation 49% 98% -49% 1 X X X
RAIT Financial Trust 49% 92% -43% 1 X X X
AECOM 48% 52% -4% 1 X X X
USG Corporation 47% 97% -51% 1 X
Rambus Inc. 46% 77% -31% 1 X X X X
Virtus Investment Partners, Inc. 46% 66% -20% 1 X X
Mattel, Inc. 46% 92% -46% 1 X X X
Boingo Wireless, Inc. 45% 58% -13% 1 X X
Chesapeake Energy Corporation 45% 57% -12% 2 X X X X
Mondelez International, Inc. 45% 85% -41% 1 X X X
Trinseo S.A. 44% 96% -52% 1 X
Envision Healthcare Corporation 44% 52% -8% 1 X X
Commercial Metals Company 44% 95% -51% 1 X X
Black Box Corporation 44% 90% -46% 1 X
The Walt Disney Company 44% 84% -40% 1 X X
IMAX Corporation 43% 30% 13% 2 X X X X X
LivePerson, Inc. 42% 91% -49% 1 X X X X
Universal Insurance Holdings, Inc. 42% 47% -4% 2 X X X X
Digimarc Corporation 42% 75% -33% 1 X X
Halliburton Company 42% 66% -24% 1 X X X X
Tanger Factory Outlet Centers, Inc. 42% 80% -38% 1 X X
Preferred Bank 42% 98% -56% 1 X X X
Hospitality Properties Trust 42% 48% -6% 2 X
Medifast, Inc. 41% 42% -1% 3 X X
Nabors Industries Ltd. 41% 44% -3% 7 X X X
Huron Consulting Group Inc. 40% 99% -59% 1 X X
iStar Inc. 40% 87% -47% 1 X X X
Nexstar Media Group, Inc. 39% 99% -60% 1 X X X
Chicago Bridge & Iron Company N.V. 39% 75% -36% 1 X X XQualys, Inc. 39% 96% -57% 1 X X X
Tutor Perini Corporation 38% 42% -4% 8 X X X X
G-III Apparel Group, Ltd. 37% 67% -30% 2 X X X
Gentherm Incorporated 37% 91% -54% 1 X X
Whitestone REIT 36% 43% -8% 2 X X
Zoe's Kitchen, Inc. 35% 96% -60% 1 X X
FCB Financial Holdings, Inc. 33% 55% -22% 1 X X X X
New York Community Bancorp, Inc. 33% 50% -17% 3 X X X X
First Horizon National Corporation 32% 95% -63% 1 X X
Cleveland-Cliffs Inc. 32% 57% -26% 1 X X XSanmina Corporation 31% 76% -45% 1 X X X
Synergy Pharmaceuticals Inc. 29% - - 1 X X X
GenMark Diagnostics, Inc. 29% 65% -37% 1 X X X X
Ameriprise Financial, Inc. 25% 81% -56% 1 X X
Ophthotech Corporation 24% 64% -40% 1 X
Patterson-UTI Energy, Inc. 24% 97% -73% 1 X X X
Bed Bath & Beyond Inc. 21% 44% -22% 4 X X X X
Nevro Corp. 20% 82% -61% 1 X X X
Wynn Resorts, Limited 20% 59% -39% 1 X X X
Acacia Research Corporation 19% 97% -77% 2 X X
FleetCor Technologies, Inc. 14% 37% -23% 3 X X X X
Nuance Communications, Inc. 10% 33% -24% 5 X X X
Count (n=55) 34 32 15 20 24 19 6
1 As of September 30, 2018.
9
• 59% of equity proposal votes in 2018 have received above 90% support, compared to 65% in 2017
• Only 29 (0.50%) of the 5,820 equity plan proposal votes since 2011 have received less than a majority vote. In 2018, only 2 (0.39%) of the 513 equity proposal votes have received less than a majority vote
• Over the past five years, we have observed that companies that receive Say on Pay support below 70% also receive about 11 percentage points less support on equity plan votes in the same year
34%48% 52% 55%
65% 61% 65% 59%
52%
43% 38% 37%30% 31% 28%
32%
13% 8% 9% 8% 6% 8% 7% 8%0.5% 0.4% 0.6% 0.6% 0.1% 0.6% 0.6% 0.4%
0%
25%
50%
75%
100%
2011n = 632
2012n = 689
2013n = 781
2014n = 805
2015n = 786
2016n = 785
2017n = 829
2018n = 513
Below 50%50 - 70%70 - 90%90%+
PERCENT
APPROVAL
90% 92% 90% 92% 91%83%
87% 88% 85% 85%79%
83% 83% 83% 80%
0%
20%
40%
60%
80%
100%
2014n = 687
2015n = 611
2016n = 568
2017n = 680
2018n = 386
+90% Say on Pay 70% - 90% Say on Pay Below 70% Say on Pay
10
• 38 director nominees (0.24%) have received vote support below 50% in 2018 – since 2014, 237 (0.28%) of the 83,550 director nominees have received vote support below 50%
• Average director election vote support at companies that received a Say on Pay vote below 50% in the prior year is 6% lower than at companies that received above 70% vote support
• Early in the proxy season, vote support for both male and female director nominees was higher than each of the previous four years. As the season continues to progress, vote support has moved slightly below the historical average of 96% since 2014
78.3% 79.1% 78.8% 78.3% 78.6%
13.0% 14.4% 14.8% 14.7% 14.1%
4.0% 3.7% 3.5% 3.9% 4.3%3.2% 2.8% 2.9% 3.0% 3.1%
2014Avg=96.0%n=12,469
201596.6%
n=18,660
201695.9%
n=18,347
201795.7%
n=18,306
201895.6%
n=15,768
95%+ 85 - 95% 75 - 85% Below 75%
95.4%
95.7% 95.6% 95.5% 95.4%
96.7% 96.8% 96.8%96.6% 96.7%
2014n=12,469
2015n=18,660
2016n=18,347
2017n=18,306
2018n=15,768
Male Female96%
93%
90%
Above 70%Say on Pay
n=51,523
50 - 70%Say on Pay
n=2,887
Below 50%Say on Pay
n=947
11
• Four environmental (9.8%) and five social (4.9%) proposals have received greater than 50% support in 2018. Darden Restaurants’ social proposal passed with a 91% vote since our last report
• By comparison, only seven environmental (2.0%) and nine social (1.0%) proposals passed over the previous seven years combined
• Thus far in 2018, the median support for environmental proposals is slightly higher than last year, while median support for social proposals is 935 basis points higher than the median support observed in 2017
An undisclosed shareholder submitted a proposal that would require General Mills to disclose quantitative metrics on pesticide use in the Company’s supply chain.
• The proposal received 31% support and did not pass
• The proponents of the proposal stated that General Mills is exposing itself to reputational risk by failing to disclose quantitative information on pesticide use in its supply chain
• In addition, the proponents noted that the company has received negative media attention for its “save the bees” media campaign due to its lack of focus on reducing herbicides and pesticides
• The company’s Board recommended that shareholders vote “Against” the proposal because the company already reports on research efforts focused on bees and other pollinators and the effects of pesticides on their habitats. The Board also explains that the company has committed to doubling its organic acreage by the end of 2019 and providing a regional educational hub for organic farmers in partnership with Midwestern BioAg
• ISS recommended shareholders vote “For” the proposal because the company does not currently disclose information about pesticide use in its supply chain; further, ISS stated shareholders would benefit from the company disclosing pesticide statistics as pesticides receive more public scrutiny
20% 19%23% 22% 23%
26% 28%30%
2011n = 39
2012n = 29
2013n = 28
2014n = 45
2015n = 64
2016n = 75
2017n = 67
2018n = 41
20%16%
22% 21% 20% 18% 17%
26%
2011n = 101
2012n = 115
2013n = 122
2014n = 142
2015n = 128
2016n = 132
2017n = 120
2018n = 103
12
FOR MORE I N F O R M A T I O N , V I S I T U S A T S E M L E R B R O S S Y . C O M
SEMLER BROSSY CONSULTING GROUP
11755 WILSHIRE BOULEVARD, 10TH FLOOR
LOS ANGELES, CA 90025
310.481.0180 | [email protected]© 2018 S E M L E R B R O S S Y C O N S U L T I N G G R O U P L L C
2018 ESG Proposals Since Last Report1
Recommendation
Company Proposal ISS Management Support q Result
Environmental Proposals (n=2)
Michael Kors Holdings Ltd. Assess Feasibility of Adopting Quantitative Renewable Energy Goals For Against 45% Fail
General Mills, Inc. Report on Impact of Pesticides on Pollinators For Against 31% Fail
Social Proposals (n=4)
Darden Restaurants, Inc. Assess Feasibility of Adopting a Policy to Phase Out Use of Antibiotics For Against 91% Pass
McKesson Corp. Report on Lobbying Payments and Policy For Against 39% Fail
NIKE, Inc. Report on Political Contributions Disclosure For Against 27% Fail
FedEx Corp. Report on Lobbying Payments and Policy For Against 26% Fail
1 As of September 30, 2018.
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