As the 2021 proxy season begins in earnest, we are able to analyze the first large-scale evidence of how shareholders are reacting to companies’ compensation decisions following the onset of the global pandemic. As of March 26, 33 S&P 500 companies have held annual meetings, with the following results:
- 25 received more than 80% say-on-pay support
- 5 received between 50-80% support
- 3 failed to receive 50% support (see below)
In two notable vote results, however, COVID-19 compensation decisions appeared to take a back seat to concerns over quantum of pay and the use of special awards.
Disney.
The Walt Disney Company received heavy criticism from both
Senator Elizabeth Warren and Abigail Disney on recent pay decisions in light of employee experiences during the pandemic. Disney has received low shareholder support for their SOP votes in each of the previous three years (2020: 53.8%; 2019: 58.7%; 2018: 45.5%). Despite making some changes, the company received 68% support at the 2021 meeting, this was despite the Compensation Committee's use of negative discretion to cancel annual incentives "in light of circumstances this year."
- Concerns were raised regarding the high target pay opportunities provided to Robert Iger despite his transition from CEO to executive chairman, and;
- The Compensation Committee’s responsiveness to the ongoing SOP concerns.
Starbucks. Shareholders have generally responded positively to Starbucks’ SOP proposals. In 2020, the company saw a modest decline to approximately 85% support. However,
at the 2021 meeting, the company only received 48% support for executive pay.
- The company provided the CEO with a special performance cash award for the second year in a row. Shareholders expressed concern with the potential target and maximum payout opportunities afforded by those awards.
- The company's decision to award the maximum payout on individual performance was largely based on the CEO's leadership through the pandemic and did not appear to drive significant concerns. Though financial targets were not met, payouts were ultimately well below target which likely mitigated concerns.
- In early 2021, Starbucks announced that it was implementing Inclusion & Diversity goals into executive compensation “with the goal of holding senior leaders individually accountable to drive inclusion and sustainability at Starbucks, among meeting other goals.” However, concerns were raised that the new I&D metrics were reducing the quantitative elements of the annual program, though it was noted that the I&D performance modifier in the long-term incentive plan includes a quantitative element (three-year goal of improving representation by more than five percent by 2023). This may serve as a warning for companies incorporating diversity metrics into incentive plans, if stakeholders determine the goals are not sufficiently specific, quantitative or robust.
