When say-on-pay (i.e., shareholders with the right to vote on the remuneration of executives) was introduced under the Dodd-Frank Wall Street Reform and Consumer Protection Act, there was a requirement that companies conduct say-on-pay frequency votes every six years for shareholders to decide whether say-on-pay votes should be held every one, two or three years. Companies first held say-on-pay frequency votes in 2011, so for many companies the 2017 proxy season is the first time that shareholders have revisited the matter since then.

Going into this proxy season, a Willis Towers Watson review of 2,848 Russell 3000 companies showed that 81 percent of companies were holding say-on-pay votes on an annual basis, 1 percent had biennial votes and 18 percent had triennial votes. A report from ISS Analytics found that of 1,121 Russell 3000 companies that had reported 2017 proxy results through May 31, shareholders supported having annual say-on-pay votes at 92 percent of the companies. According to a Compensation Advisory Partners report, among S&P 500 companies, the results were even more pronounced, with 96 percent of companies receiving shareholder approval for annual votes, 0 percent receiving approval for biennial votes and 4 percent receiving approval for triennial votes. This strong support for more frequent votes indicates that companies who currently have biennial or triennial voting will likely feel the push from shareholders to move toward annual voting.

Although shareholders support more frequent say-on-pay votes, they also overwhelmingly approve of executive compensation. These results suggest that shareholders enjoy having the opportunity to voice their opinions on compensation and other matters regularly, even if their opinions are favorable and supportive of management. This serves as a reminder that companies should prioritize regular shareholder engagement on important corporate governance matters. As many companies have learned from experience, the best time to build relationships with shareholders is when they are satisfied with how management is addressing any issues. When companies wait until shareholders become disgruntled before opening the lines of communication, they run the risk of having started too late.