I. Introduction

Since their conception in 2011, say-on-pay (“SOP”) proposals have become a hot-button issue for proxy advisors, politicians, corporate governance experts, and the public at large. Though they are simply advisory votes on the previous year’s pay, if a substantial portion of shareholders vote AGAINST the pay package (e.g. 20%), they can send a strong signal to the board.

In this piece, we argue that SOP proposals are passing at a far greater rate than one would expect given escalating public criticism of excessive CEO pay. Improved SOP outcomes, that are more reflective of investor interests, can be achieved through:

1. Increased pass-through-voting
2. Independent and unconflicted proxy advisory services

II. Say-on-Pay Proposals Receive Overwhelming Support

As of the end of the 2024 proxy season, only four companies in the S&P 500 had failed their SOP vote[1]. For the 2025 proxy season, and as of June 26, only five S&P 500 companies failed their SOP votes[2]. Given mounting concerns from the public decrying excessive CEO pay packages[3],[4] and the fact that CEO pay continues to rise[5], this is surprising.

III. Why Say-on-Pay Proposals Pass at Such High Rates

The high success rate of these SOP proposals indicates that either (1) shareholders don’t have major concerns about executive pay despite some public outcry or (2) shareholders are concerned about executive pay but those concerns are not reflected in SOP votes at annual corporate meetings.

As stated in a recent post on the Harvard Forum[6], adverse outcomes on say-on-pay votes are typically driven by adverse recommendations from one or more of the major proxy advisors and/or the largest asset managers. This small handful of firms therefore holds a great amount of power and can significantly influence votes on say-on-pay and other ballot items.

To provide underlying investors more control over the votes that are cast, many asset managers have introduced pass-through-voting, and the top three asset managers have included Egan-Jones’ Wealth-Focused Policy[7].

IV. How Should Executives be Paid?

In contrast to these SOP proposal results, Egan-Jones’ two most popular policies recommended AGAINST the SOP proposal at S&P 500 companies more than 30% of the time in 2024[8]. Egan-Jones’ policies are designed to protect and enhance shareholder wealth.

CEOs should be well compensated for driving above-average shareholder returns. Conversely, poor shareholder returns should not be rewarded with above-average compensation packages. Ideally, CEOs should be paid no more than necessary for them to be motivated and retained.

V. How to Respond

The current widespread passage of SOP proposals seemingly gives companies a blank check for executive compensation. Shareholders, and especially those who manage others’ assets, have the privilege and responsibility to evaluate and vote on executive compensation with the sole purpose of driving shareholder value.

We believe stronger SOP outcomes can be achieved through broader application of pass-through voting, which ensures voting power rests with those underlying investors. Furthermore, as most asset managers, pension funds, and RIAs rely on guidance from third-party proxy advisors, it is essential that this advice come from independent, conflict-free parties. When proxy advisors derive significant revenue from issuers, it can compromise their ability to provide objective recommendations on those same issuers’ executive pay packages.