New data reveals U.S. "say on pay” proposals received increased investor backing in the 2023 season, as issuers took steps to align compensation with broader company performance

Investor support for S&P 500 “say on pay” proposals increased for the first time in five years, with CEO average realized pay declining by 68% to $25.6 million, compared to $79.9 million in 2021. This is according to the new Diligent Market Intelligence: Investor Stewardship 2023 report from Diligent.

According to the report, S&P 500 “say on pay” resolutions won 88.9% average support this season, up from 87.8% a season prior. This is in large part due to issuers addressing shareholder requests for more modest realized pay, alongside fewer one-time retention awards.

“Rising inflation and depressed markets played a role in shaping investor voting patterns in the 2023 season,” said Josh Black, editor-in-chief of Diligent Market Intelligence, at Diligent. “Boards should analyze and benchmark data to understand and address shareholder concerns, while asset managers must identify risk factors that could upend their portfolios.”

The rise of ESG funds, a pandemic and social movements centered on diversity, equity and inclusion (DEI) forced investors to ask tougher questions and demand transparency over how companies treated business risks. Shareholder proposals seeking freedom of association reporting, alongside requests for broader human rights disclosure, won the backing of investors. Proposals seeking understanding of CEO pay structures, specifically severance payments and clawback policies, also won support.

Three themes emerge from the report’s key findings that both boards and investors should have on their radar. These include:

Pay plan support increases as companies take steps to align pay with performance:

• S&P 500 average CEO realized compensation decreased by 68% to $25.6 million in 2022, compared to $79.9 million in 2021.
• In response to more modest payouts, S&P 500 “say on pay” resolutions won 88.9% average support, up from 87.8% a season prior. 2023 marks the first time in five years where support for “say on pay” proposals increased in comparison to the previous season.

Rising inflation drives investor attentions toward employee welfare and CEO pay:

• Average support for U.S. environmental and social shareholder proposals nearly halved to 19.6% in the 2023 season, compared to 27.7% a season prior.
• Social proposals gained traction amid cost-of-living concerns. The nine freedom of association proposals subject to a vote in the U.S. won 35.5% average support, up from one winning 38.9% support a season prior.
• Average support for the two proposals asking U.S.-listed companies to approve clawback provisions increased to 41.5%, compared to 27.5% a season prior.

More companies are citing cybersecurity and AI risks:

• Companies are facing a growing number of risks, with the average S&P 500 company disclosing 34.4 risk factors in 2023 10-K reporting. This number has risen steadily since 2020, where the average company disclosed 32.7 risks, indicating a need for a connected view of risk.
• Nearly 80% of S&P 500 companies cited cybersecurity risks in 2023 and over 18% cited AI risks, up from roughly 79% and 14% in 2022, respectively.

To download the full report click here.

About the report

Data from Diligent Market Intelligence’s Voting, ESG, Compensation and Governance modules, as well as Diligent’s Compensation and Governance Intel (CGI) and Manzama solutions, run from July 1, 2022 to June 30, 2023. Further data is available on request, although bespoke analysis may take 48 hours. For more information, please email dmi.press@diligent.com

About Diligent Market Intelligence

Diligent Market Intelligence (DMI) is a market-leading provider of shareholder activism, investor voting, and corporate governance data. Through its web application and data feeds, clients can access the most complete solution for listed company intelligence on the market, with broader and deeper insights than ever before.

About Diligent

Diligent is a leading GRC SaaS company that gives organizations the tools and solutions they need to bring clarity to complex risk, elevate impactful insights and get ahead of a world that is constantly changing. With solutions across governance, risk, compliance, audit and ESG, Diligent empowers more than 1 million users and 700,000 board members and leaders to make better decisions, faster. No matter the challenge. Learn more at diligent.com.

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