Inaugural Say-on-Pay Proxy Season Showed Minimal Impact

July 28, 2011 ( – Most U.S. public corporations saw a limited immediate impact from the first-ever say-on-pay proxy season, but the majority are planning changes for next year, according to a new survey by Towers Watson.

Many companies are either planning or considering making changes to their executive pay-setting process and overall preparations for the 2012 proxy season, Towers Watson reported. Some companies have even reported anticipating a need to enhance their efforts to prepare for the next proxy season in order to improve their voting results.

Nearly eight in 10 (79%) companies claimed that say-on-pay either had no or only a little to moderate impact on their focus for the 2011 proxy season, and 72% do not plan to adjust their efforts next year. Another 82% reported taking at least one action to successfully achieve a positive say-on-pay vote.

The survey identified the most actions companies took to achieve a positive say-on-pay vote:

  • Reaching out to shareholders directly (56%);
  • Communicating with proxy advisers (53%);
  • Hiring a proxy solicitor (40%); and
  • Making changes to their pay programs (32%).

“Most companies are breathing a sigh of relief now that the proxy season is over,” said Doug Friske, global head of Towers Watson’s Executive Compensation consulting practice, in a press release.

The survey found that 16% of companies received less than 80% shareholder support, but only 41% of companies that received at least one proxy advisory firm “against” recommendation plan to put in more effort in 2012. Among those that received less than 80% shareholder support and at least one negative vote recommendation, however, 71% plan to increase the time and effort they put in next year.

“The survey findings, along with our consulting experience,” added Friske, “suggest that these companies are taking shareholder views quite seriously and plan to respond in some way.”

Towers Watson reported that almost all surveyed companies (91%) are planning or considering at least one change in their pay-setting process or preparations for the 2012 proxy season:

  • 44% plan to perform additional analyses on the link between pay and company performance;
  • 44% have already made program changes, such as modifications to severance provisions, change-in-control arrangements and perquisites
  • 41% plan to devote more attention to preparing the Compensation Discussion and Analysis (CD&A); and
  • 17% plan to make changes to their core compensation programs (i.e., base pay and incentives).

“We believe companies need to start thinking now in a proactive way about their strategy for next year’s proxy season,” said Todd Manas, a director in Towers Watson’s Executive Compensation practice in New York. “Even companies that won shareholder approval this year can’t assume they’ll receive a similar outcome next year.”

Other key findings from the survey include:

  • Most employers (64%) are only moderately concerned about the pending SEC implementation of the Dodd-Frank requirement to show executive pay versus company performance;
  • Only 20% of companies have already provided additional disclosure information in the CD&A describing the alignment between executive pay and key performance metrics, and will continue to do so when the Dodd-Frank requirement becomes mandatory; and
  • Most companies (57%) think proxy advisory firms have relatively little influence with regard to pay program design, however, roughly the same number (55%) view proxy advisors as having an influence on the results of say-on-pay votes.


-Sara Kelly