The Test of Time: Adapting to a New Era of Executive Compensation

In 2018, CalPERS voted against 45.4% of the S&P 500 on Say on Pay, according to corporate governance nonprofit As You Sow. These results are drastically higher than in previous years, as its five-year average for opposing Say on Pay votes was 16%.

According to Simiso Nzima, Investment Director of Global Equity at CalPERS, among the various compensation goals for CalPERS is to “ensure that the design and practice of compensation at portfolio companies appropriately incentivizes management and employees to generate long-term sustainable returns in alignment with the interests of long-term investors.”

This assessment by CalPERS speaks volumes to the fact that Say on Pay continues to have a lasting impact on the executive compensation landscape almost a decade following its inaugural year. While executive compensation packages have been largely accepted by investors, 2018 saw a decrease in the approval percentage that Equilar 500 companies received. In 2018, less than half of companies received more than 95% approval on their executive pay packages, which is 10 percentage points less than the year prior. Furthermore, the number of Say on Pay failures nearly doubled from six to 11 in 2018 (Figure 1).

Source: The Test of Time: Adapting to a New Era of Executive Compensation

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