Twenty-three percent of companies recommended an annual vote, while just 14% recommended a biennial vote. The study found the three-year interval was the most common recommendation regardless of revenue, market capitalization or industry grouping.
A press release explained that the Dodd-Frank Act passed in 2010 requires companies with annual meetings scheduled on or after January 21, 2011, to hold both an advisory vote on executive compensation (say on pay) and an advisory vote on the frequency of this vote (say on frequency). Shareholders must be given an opportunity to express their preference for a say on pay every one, two or three years, but companies may make a more specific recommendation and include rationale in their supporting statement.
“Companies recommending a say on pay vote every three years typically made one of two arguments,” said Joseph Sorrentino, Managing Director of Steven Hall & Partners, in the press release. “First, executive compensation programs and policies are typically designed to reward the long-term growth and performance of a company and it is difficult to assess the linkage between such performance and compensation on an annual basis. Second, companies believe a three-year period will provide them with adequate time to engage stockholders and respond to say on pay vote results.”
Ten percent of the companies made no recommendation to shareholders regarding frequency of the advisory vote. “Companies that decided not to make a recommendation stated their desire to consider the views of the company’s shareholders before making a determination on the frequency of say on pay,” said Steven Hall Jr.The study analyzed recently filed proxy statements for 62 companies with say on frequency advisory votes on the ballot.