Compensation Advisory & Proxy Solicitation – Alliance Advisors

Case Study: Compensation 101 – Pay for Performance applies to service providers as well.

Nick Thomas — Wed, 19 Jun 2024 18:56:59 +0000

Introduction

When it is time for a corporate issuer to ask shareholders for a new equity plan or to increase the available shares under an existing plan one of the first things they think about is “how many shares will ISS support.” The next step for many companies is to pay ISS Corporate (formerly ICS), the corporate consulting arm of ISS, to determine how many shares the proxy advisory firm will support.

This is not always the best approach since ISS Corporate will only give you a view of the shares that follow ISS recommendations and not a 360-degree view of all your shareholders. The Case Study that follows serves as a cautionary tale to consider before signing up with ISS Corporate.

Assignment and Challenges

Our client is a 7 billion market capitalization financial services firm with over 90 percent of its outstanding shares held by institutional investors. Well before the proxy was filed our client paid and worked with ISS Corporate to arrive at a share number that ISS would support. The proxy was filed in the early spring of this year and our client felt confident that with the ISS Corporate consulting work performed when structuring the plan proposal, the ISS research side would recommend for the equity plan proposal.

However, when ISS released its report, our client was shocked to find out that they were recommending against the share increase for the equity plan. Obviously, this caused a high level of frustration for our client and more importantly concern as to whether the plan proposal would pass a shareholder vote.

Solution

The ISS Corporate team was in black-out during this time would not assist. Springing into action Alliance Advisors analyzed our client’s shareholder base to determine how much impact the ISS recommendation would have. Next, we compared the equity plan’s quantitative and qualitative features to the policy guidelines of their shareholders. At this point it became clear to Alliance Advisors that there was a high probability that the plan proposal, with active solicitation, would overcome the negative ISS recommendation. We then determined exactly what institutions we needed to target to overcome negative votes from the ISS influenced shares.

Not leaving anything to chance, our client and our shareholder engagement team embarked on a shareholder outreach program to talk them through the plan. Our outreach program confirmed our research that most institutions did not have any concerns about the equity plan. We also targeted several shareholders that we knew were directly influenced by ISS and several of them disregarded ISS recommendations and voted with management.

Results

The equity plan proposal was approved by shareholders at the annual meeting with over 80 percent support.

Here are lessons learned from the above situation:

Analyze your shareholder base: This analysis will help you determine which or your shareholders are influenced by ISS, and how many have their own internal guidelines. This is the FIRST step a company should do before spending the money with ISS Corporate. You may find the ISS Corporate cost is counterproductive.
Take stock of your relationships with your shareholders: In the event ISS does recommend against your equity plan it will be important to know which of your ISS-influenced shareholders you might be able to engage with to override ISS.
ISS support is rarely critical to getting shareholder support for your equity plan, providing that you have done a proper analysis of your shareholder base and are conducting an active solicitation: While almost all plans that ISS recommends against pass a shareholder vote, companies should not leave anything to chance. Know where you are going to get the votes to overcome ISS-influenced shares that vote against and have your proxy solicitor go get them.
Hiring ISS Corporate guarantees you nothing but a large invoice. Too often we see issuers retaining ISS Corporate to assist with their compensation or governance needs which only takes the narrow ISS view. At Alliance Advisors our process is more comprehensive with data-driven intelligence that leads to consistently successful outcomes for all our clients.

At Alliance Advisors we take a 360-degree view and will account for all your investors voting policies. Although ISS can be an important part of the proxy we do not focus solely on them. Our process is comprehensive and backed with data driven intelligence that leads to consistently successful outcomes for all our clients.

Compensation 101 Pay for Performance

Case Study: Previously, Failed Say on Pay Proposal Compensation Advisory, Shareholder Meeting Advisory

Nick Thomas — Thu, 29 Jun 2023 09:39:37 +0000

Assignment and Challenges

Compensation advisory case study
Our client is a NYSE $2 billion market cap company that provides engineered products, industrial technologies, and solutions in the United States and internationally. Institutions owned over 90% of the outstanding shares. Prior to becoming an Alliance Advisors client, this issuer failed Say on Pay in 2022. Alliance Advisors was retained to advise the client on matters related to the failed vote and how to respond successfully for their 2023 annual meeting.

Solution

Alliance Advisors provided commentary and guidance on the proxy statement, with a particular focus on disclosure regarding the response to the failed Say on Pay vote in 2022.
We prepared vote projections under various scenarios including voting on directors on the Compensation & Management Development Committee and on the Say on Pay proposal.
Our Corporate Governance team provided background information and outreach efforts on the top 50 institutions. This included setting up calls with the appropriate contacts at each institution.
We provided advice and guidance after ISS recommended voting against Compensation & Management Development Committee members and voting against the Say on Pay proposal. We worked with our client to draft a response to the ISS recommendations and submitted the response to ISS on our client’s behalf.

Results

After filing the company’s response. ISS reversed its against recommendations and recommended that shareholders support all directors and Say on Pay.

In addition, all directors were elected with over 95% of the shares voted, and over 75% of the shares voted in favor of the Say on Pay proposal.

Alliance Advisors is now working with the client in preparation for the 2024 annual meeting including arranging off-season institutional outreach and assisting in drafting of ESG disclosure.

Case Study: Remuneration Proposal. Shareholder Meeting Advisory – Shareholder Engagement

Nick Thomas — Fri, 16 Jun 2023 07:17:47 +0000

Assignment and Challenges

Shareholder meeting advisory
Our client is a Fintech, $1.6 billion market cap company listed on the London Stock Exchange (LSE), headquartered in Israel. Alliance Advisors was hired to ensure the passage of a management remuneration proposal. The company had faced corporate governance issues in the past on matters that were acceptable in its home market but in conflict with market practices for LSE-listed companies.

The company was expecting negative recommendations from proxy advisors and retained Alliance Advisors to guide them through the process.

Solution

Alliance Advisors designed a shareholder engagement program focused on key institutional investors and proxy advisors. Our program focused on the positive steps the company had taken to bring the company’s policies in line with LSE guidelines. Alliance Advisors was able to position the company in front of proxy advisors and institutional investors before they issued their vote recommendations thus heading off negative vote recommendations.

Results

All matters put before shareholders passed even though not all investors supported management. As part of the strategy, Alliance Advisors conducted a broad solicitation to overcome the negative voting which resulted in higher voter participation than in previous years.