This week, progressive non-profit organization As You Sow released However, the report also notes that “several funds with more than $100 billion in assets” have more than doubled the number of CEO packages they vote against.detailing the 100 most overpaid CEOs, returning to its bellwether message of accusing major investors, including BlackRock and Vanguard, of rubber-stamping CEO pay packages while also highlighting the first year of pay ratio disclosures as an indicator of growing pay disparity.
The report identifies the investors that voted against say on pay 40% of the time, For example, it notes that CalPERS has increased its say on pay "against" votes more than eight-fold since 2013, opposing CEO pay packages 45% of the time in 2018. Conversely, it noes that BlackRock,Vanguard, and State Street all voted against say on pay for S&P 500 companies four percent of the time or less, although those investors discuss their heavy focus on engagement with companies.
“It is gratifying to see the improved voting records of so many of these funds, who are holding companies and boards accountable for excessive CEO pay packages,” said Rosanna Landis Weaver, program manager of Executive Compensation at As You Sow. “We hope this trend continues. We believe that the private conversations, known as engagements, are insufficient to deal with the systemic problems.”
The tactic of targeting major investors is notable. Historically, activist groups like As You Sow primarily targeted companies to implement ESG and CSR related initiatives. During the last five years, the tactic has shifted into pressuring the major investors to require the companies which they own to make those changes. The tactic has been enormously successful and has yielded major changes on several disclosure fronts, like climate change. As You Sow has been targeting funds on executive pay for years and has yet to enjoy the same success as other initiatives. However, companies should be aware that investors will continue to face increasing pressure to take stand on income inequality and other human capital management issues as well as share buybacks.