Executive compensation and director independence come under scrutiny in new guidelines
Shareholder advocacy group As You Sow has released its first set of proxy voting guidelines, focusing on ESG issues such as executive compensation, environmental management, corporate political activity and other issues.
‘This first edition of our guidelines is notable in that it incorporates new ESG standards used by leading sustainable and responsible investors on such issues as board diversity, board accountability and proxy access, among other issues,’ states the introduction to the guidelines. ‘Additionally, the guidelines help shareholders evaluate executive compensation proposals by identifying red flags in the proxy statement.’
In the 15 pages of guidelines, As You Sow backs voting against executive compensation when discretionary bonuses are not based on performance criteria, when the chief executive is also the chairman and receives CEO-level pay for both positions, and when the CEO’s compensation is more than double the level of the next-highest-ranking executive.
As You Sow says it will also support proposals that seek to strengthen links between executive pay and performance, link executive pay to ESG metrics including greenhouse gas emissions, require shareholder votes on golden parachutes or severance compensation, and disclose a comparison between executive pay and employees’ median wage.
The organization, which drafted the guidelines in conjunction with Proxy Impact, also says it will oppose the election of a director who:
- Is the CEO or audit committee member of a company that issued a restatement ‘due to fraud, misrepresentation or significant non-compliance or accounting errors’
- Serves on more than two other boards as CEO or three as any other board member
- Served in the past three years on the board of a company that ranked in the bottom 25 percent of its industry in terms of stock performance
- Attends fewer than 75 percent of board meetings ‘without a valid reason’.
As You Sow adds that it will support shareholder proposals that ask companies to report on laboratory animal testing, female pay disparity, political spending, the potential human rights risks of its products or supply chains and privacy and data security, among other issues.
