Investor unease with CEO pay growing

As executive pay swells, investor support is declining, according to a new report from ISS Corporate Solutions (ICS).

The firm, which is a division of proxy advisory firm Institutional Shareholder Services Inc. (ISS), reported that shareholder support for so-called “say-on-pay” advisory votes on executive compensation declined to its lowest level since advisory votes were made mandatory in 2011.

It found that median investor support for say-on-pay proposals at S&P 500 companies so far this year is 92.2%, which is down from 92.7% last year, and 94.1% in 2019.

“These results potentially suggest a continued growing disconnect between board determinations of CEO compensation opportunities and shareholders’ support for the pay packages,” said ICS executive director, Brian Johnson, in a release.

“Against the backdrop of the current inflationary environment, investors appear to be more inclined than ever to vote against large pay packages that aren’t justified by company performance,” he added.

ICS reported that the decline in shareholder support comes as median CEO pay at S&P 500 companies climbed by 9% to a record US$14.4 million, up from US$13.2 million in 2020.

The firm reported that its analysis found that CEO pay increases, “were largely driven by significantly higher bonus payouts… and continued increases in long-term incentive grant values for executives.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.