BOSTON
(Reuters) - Even as top U.S. asset managers BlackRock Inc and State Street Corp
pressed companies on climate and diversity issues this year, they made few
waves on another area of corporate governance: CEO pay.
Researcher
Proxy Insight estimates BlackRock supported management in advisory "Say on
Pay" votes at S&P 500 companies 97 percent of the time during the
proxy season ended June 30, one percentage point lower than in the previous
year, based on a review of voting tallies by eight outside funds that are voted
by BlackRock.
Funds voted
by a unit of State Street supported executive pay 94 percent of the time this
year, also one percentage point lower than in the previous season, based on a
similar review of early tallies. More complete filings are due in coming weeks.
The
continued strong support helps explain how CEO pay keeps rising, part of a
broader debate over inequality, even as large corporations changed their
stances on climate and social issues under pressure from investors.
BlackRock
for instance has already disclosed it switched sides and helped pass a measure
on climate risk reporting at Exxon Mobil Corp's annual meeting in May. State
Street says it voted against directors at 400 companies this year that had no
female board members and showed no signs of changing, part of a campaign for
gender diversity that also included the placement of the famed "Fearless
Girl" statue on Wall Street.
Jon
Lukomnik, head of the Investor Responsibility Resource Center Institute, a
frequent critic of pay designs, said the statistics reflect how it is often
hard for large fund managers to vote against pay because the issues can be more
complex than on other governance issues.
Factors that
could influence a pay vote include a company's bonus metrics or the peers it
measures pay against. "If you vote 'no' on executive comp, does it mean
you don't like how it is structured? Or you don't like the total amount? It's
more of a continuum," Lukomnik said. "When it's a close call, they
tend to vote 'yes'."
The median
S&P 500 CEO was paid $12.1 million last year, up from $11 million among the
same group in the previous year, according to ISS Analytics.
To be sure,
the S&P 500 index's 9.5 percent rise in 2016 made it easier for many boards
to justify pay raises for their leaders. Ira Kay, a corporate pay consultant,
said the fact that companies win the vast majority of the advisory votes on
pay, even as they lose on other issues, shows their pay plans work as designed.
"The
vast majority of shareholders at the vast majority of companies are highly
satisfied with their pay and performance alignment," Kay said.
A spokesman
for BlackRock declined to comment before its more complete voting data is
disclosed in coming weeks. BlackRock has said it expects companies to tie pay
to long-term performance and that it may vote against directors when companies
have not demonstrated such a connection.
A State
Street representative sent data showing that its funds supported pay plans
about 94 percent of the time in the first six months of 2017, roughly the same
rate as in the same period a year earlier, across more than 2,000 companies in
each year.
Technically
State Street funds voted "against" pay at more companies this year,
140, than in the first half of 2016 when it voted 'against' pay at 131
companies.
The higher
number shows State Street's concerns about "quantum of pay," meaning
the overall level of pay, said Rakhi Kumar, State Street's head of governance
via e-mail.
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