The Equilar Institute provides in-depth research and analysis on boards of directors, shareholder engagement, executive compensation and other issues affecting the world of corporate governance. Below are some key highlights from the last quarter that showcase the in-depth information available in public filings via the Equilar database. Visit www.equilar.com/institute or www.equilar.com/blog.html to read these articles in full as well as many more.
Equilar’s “CEO Tracker” series looks at employment trends at the top level of Equilar 500 companies on a quarterly basis. As of the end of Q2 2021, 29 CEOs had already left or announced plans to leave their posts this year. This compares to 32 at the same time one year ago. Among the successors of vacated CEO positions in 2021, none have been women so far. With two women stepping down during this time frame, this has led to an overall decrease in the prevalence of women CEOs. In all of 2020, 15% of the open chief executive roles in the Equilar 500 went to women.
The leading U.S. companies are increasingly tying executive pay to ESG initiatives. A recent Equilar analysis found that 44 companies in the Fortune 100 have now included 62 performance metrics intended to incentivize environmental and social goals. Among those, 23%—or 14 incentive plans—included diversity goals, which has now become the most prevalent metric. Environmental (11), culture (nine), and human capital and safety (eight each) were other common targets that must be reached for executives at these companies to receive a portion of their compensation. All but one of the pay packages including ESG metrics were annual incentive plans.
As CEO pay remained on par with previous years despite the tumult of the pandemic and other economic factors, the number of shareholders voting against executive pay packages increased in 2021.* Among the Russell 3000, 3.1% of companies received less than 50% support on Say on Pay through the end of May, the highest failure rate in the past five years. This potentially indicates a growing disconnect between shareholders and companies may be forming. Indeed, the median pay for CEOs at the companies receiving failing votes was $17 million, compared to about $9 million among companies that received 50% to 70% approval. Russell 3000 companies that earned more than 90% approval on Say on Pay paid their CEOs $5.2 million at the median.
Women account for half the population and the overall workforce, yet only one-quarter of board seats. Meanwhile, non-white individuals account for approximately 40% of the U.S. population but less than 20% of directorships. As a result, boards have to do more than say they are going to improve diversity—investors and other stakeholders expect them to show their work. A study of about half the Russell 3000 showed that 48.7% answered the call by disclosing a detailed breakdown inclusive of gender diversity on their boards, while just over one-third disclosed a race/ethnicity breakdown. A very small portion, 0.4%, indicated sexual orientation.