May 2, 2017
Golden Parachute Votes: Do Institutions “Walk the Walk”?
SEC rules require companies seeking shareholder approval of a deal to conduct a separate advisory vote on any “golden parachute” compensation arrangements involved in the transaction. Reading the voting policies of major institutions, you might well expect that they would vote against many of these proposals – but this Proxy Insight article says that isn’t usually the case.
The article discusses the voting behavior of major institutions when it comes to golden parachute advisory votes – and says that while investors typically oppose golden parachutes in principle, caveats in their policies often result in much higher support in practice. Here’s an excerpt:
8 out of 10 investors supported more than half of all golden parachute resolutions they voted on, indicating that there are at least some investors paying lip service to good governance through their policies, yet taking a very different approach in practice.
This could help to explain the fact that, despite their divisive nature and tendency to provoke a fair amount of shareholder opposition, golden parachute proposals still rarely fail. Of the 438 golden parachute proposals that Proxy Insight has collected, all but 30 proved to be successful with the average level of support for these being 83%.
There are a couple of outliers among institutional investors. Vanguard supported only 40% of golden parachute proposals, despite voting with management 95% of the time on other matters, while T. Rowe Price voted in favor of golden parachutes just 14% of the time, even though it supported management in 93% of other votes.
– John Jenkins