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2,028 VOTE RESULTS

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144 VOTE RESULTS

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1

1,715 Russel l 3000 companies and 387 S&P 500 companies have d isc losed a CEO Pay Rat io and reported Say on Pay results in 2018. The relat ionship between the two numbers is relat ively weak for the Russel l 3000, where average Say on Pay support for companies with a Rat io above the index’s median is 89.2%, compared to 91.7% for those with a below median Rat io. The same relat ionship has been stronger among the S&P 500 companies, where average Say on Pay support is 86.7% for companies that d isc lose a Rat io above the median, compared to 91.5% for those with a below median Rat io.

The median and 75 th percent i le Rat ios of the S&P 500 are more than two t imes the median and 75 th

percent i le Rat ios of the Russel l 3000

Median employee compensat ion for the S&P 500 and Russel l 3000 are with in 10% of each other at var ious percent i les unt i l the 90 th percent i le

The Russell 3000 distribution tails off near 300:1 while the S&P 500 distribution tails off near 500:1

73x109x

166x

303x

550x

16x 34x 72x148x

323x

0x

100x

200x

300x

400x

500x

600x

10 P 25 P 50 P 75 P 90 P

S&P 500

(n=415)

Russell 3000

(n=1,971)

$24

$48

$68

$104

$138

$24 $43$63

$99

$154

$0

$50

$100

$150

$200

10 P 25 P 50 P 75 P 90 P

Tho

usa

nd

s S&P 500

(n=415)

Russell 3000

(n=1,971)

Russell 3000 50th P: 72x75th P: 148x

S&P 50050th P: 166x 75th P: 303x 90th P: 550x

90th P: 323x

0%

5%

10%

15%

20%

25%

0x 100x 200x 300x 400x 500x 600x 700x 800x

Pe

rce

nta

ge o

f Co

mp

anie

s

CEO Pay Ratio

Russell 3000 S&P 500

2

S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s , S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e

2 6 , 2 0 1 7 . F i n a n c i a l d a t a p r o v i d e r c h a n g e d f r o m F a c t S e t t o S & P C a p i t a l I Q a s o f J u l y 2 0 1 8 .

* E xc l u d e s c o mp a n i e s w i t h n o e mp l o y e e s , n o C E O , o r C E O s w i t h n o c o mp e n s a t i o n .

• The CEO Pay Ratio is more heavily influenced by the magnitude and variance in CEO compensation than by the median employee compensation

• Company revenue, a primary determinant of CEO compensation, has a direct correlation with the CEO Pay Ratio

• CEO compensation scales as company size increases, while median employee compensation has little correlation with company size

• The CEO Pay Ratio is inversely correlated with median employee compensation – companies with bottom quartile median employee compensation have significantly higher Ratios

25P: $2.4M $43.1K

50P: $4.7M$63.1K

75P: $8.6M

$99.1K

10P: $1.2M

90P: $14.4M

$24.1K

$153.6K

CEO Compensation Median Emp. Compensation

27x64x 88x

144x213x

0x

100x

200x

300x

400x

< $0.5Bn = 581

$0.5-$1.5Bn = 492

$1.5-$3.5Bn = 346

$3.5-$10Bn = 310

> $10Bn = 242

115x155x 156x

214x276x

0x

100x

200x

300x

400x

< $5Bn = 112

$5-$10Bn = 98

$10-$15Bn = 72

$15-$30Bn = 60

> $30Bn = 73

186x

80x 73x 64x37x0x

100x

200x

300x

400x

< $40Kn = 428

$40-$55Kn = 353

$55-$70Kn = 319

$70-$100Kn = 387

> $100Kn = 484

396x

198x 185x123x 91x

0x

100x

200x

300x

400x

< $50Kn = 114

$50-$65Kn = 82

$65-$90Kn = 82

$90-$120Kn = 62

> $120Kn = 75

3

S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s , S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e



• The CEO Pay Ratio and CEO compensation show a positive relationship, while the Ratio and median employee compensation show an inverse and weak relationship

• There is a particularly strong relationship between the CEO Pay Ratio and CEO compensation for Ratios below 100:1

R² = 0.244

$0

$5

$10

$15

$20

$25

$30

$35

0x 50x 100x 150x 200x 250x 300x 350x 400x 450x 500x

CEO

Co

mp

. ($M

M)

CEO Pay Ratio

R² = 0.173

$0

$50

$100

$150

$200

$250

$300

0x 50x 100x 150x 200x 250x 300x 350x 400x 450x 500x

Me

dia

n E

mp

loye

e C

om

p. (

$000

s)

CEO Pay Ratio

4

S o u r c e : S e ml e r B r o s s y d a t a a n d a n a l y s i s ; F u n d v o t e s , L L C ; I S S V o t i n g A n a l y t i c s . S & P C a p i t a l I Q . R u s s e l l 3 0 0 0 s a mp l e e f f e c t i v e a s o f J u n e



42x 47x 51x 56x 65x78x 80x 82x 89x

149x

199x

0x

100x

200x

300x

400x

500x

600x

700x

800x

Financials

n=365

Utilities

n=62

Health Care

n=274

Real Estate

n=142

Energy

n=102

Information

Technology

n=230

Industrials

n=297

Comm.

Services

n=84

Materials

n=97

Consumer

Staples

n=66

Consumer

Discretionary

n=252

• CEO Pay Ratios differ greatly by sector among companies in both studied indices

• CEO pay typically scales more proportionately than median employee compensation as company size increases, illustrated by higherCEO Pay Ratios among the S&P 500 relative to the Russell 3000 across nearly all sectors

• The composition of a company’s workforce and the use of seasonal or part-time employees are primary drivers of high CEO Pay Ratios at the 75th and 90th percentiles in the Consumer Staples and Consumer Discretionary sectors

• Unionized workforces at Utilities companies leads to high median employee pay, which drives the sector’s low CEO Pay Ratios

1355:1

951:1

25P

Median

75P

10P

90P

Legend

25P

Median

75P

10P

90P

Legend

1Reclassification of GICS sectors in September 2018 resulted in a shift of companies between the IT, consumer discretionary, and communication services (formerly telecommunication services) sectors.

164x

94x

215x

117x 100x

145x169x

285x

158x

276x

449x

0x

100x

200x

300x

400x

500x

600x

700x

800x

Financials

n=58

Utilities

n=28

Health Care

n=53

Real Estate

n=30

Energy

n=27

Information

Technology

n=41

Industrials

n=58

Comm.

Services

n=18

Materials

n=20

Consumer

Staples

n=23

Consumer

Discretionary

n=59

5




• The Pay Ratio has an inverse relationship with Say on Pay but is not a primary driver of Say on Pay results

• The inverse relationship between the Pay Ratio and Say on Pay is stronger among the S&P 500 than the Russell 3000. Vote support is almost the same for the three lowest Russell 3000 Pay Ratio groups

• While only 21% of the Russell 3000 discloses a Ratio above 175:1, those companies make up 45% of all Say on Pay vote failures

< 50x26%

50x - 100x16%

100x - 175x14%

175x - 250x12%

> 250x33%

Failed Say onPay (n=43)

< 50x36%

50x - 100x26%

100x - 175x17%

175x - 250x7%

> 250x14%

All Companies(n=1,715)

91.5% 91.6% 91.2% 87.5%

17.8% 19.8% 18.5%

27.1%

Ratio < 40x

n = 480

40x - 75x

n = 390

75x - 150x

n = 415

> 150x

n = 430

Avg SOP Vote Companies with SOP < 90%

93.6% 91.9% 89.9% 87.6%

13.8% 14.9%20.4%

26.2%

Ratio < 100xn = 91

100x - 175xn = 115

175x - 300xn = 85

> 300xn = 96

Avg SOP Vote Companies with SOP < 90%

14%

11%

11%

18%

Ratio < 40xn = 480

40x - 75xn = 390

75x - 150xn = 415

Ratio > 150xn = 430

5%

8%

11%

16%

Ratio < 100xn = 91

100x - 175xn = 115

175x - 300xn = 85

Ratio > 300xn = 96

6

55 Russell 3000 companies (2.7%) have failed Say on Pay in 2018. Four companies have failed since our last report – Black Box Corporation, Envision Healthcare Corporation, RAIT Financial Trust, and Vista Outdoor.

• The failure rate (2.7%) has increased 4 basis points since the last report and is higher than the year-end failure rates in the previous two years

• The average vote result (90.3%) is the lowest since 2012

• Nearly one-third of the S&P 500 has received vote support below 70% at least once since 2011

• 8% of Russell 3000 and 7% of S&P 500 constituents have failed Say on Pay at least once

7%

32%

66%

8%

25%

54%

Below 50% Support at Least Once



Vote results for current S&P 500

and Russell 3000 constituents

S&P 500 Russell 3000

72% 73% 76% 75% 76% 75% 78% 76%

21% 19% 15% 17% 16% 17% 15% 16%

6% 6% 6% 6% 6% 6% 5% 6%

1.4% 2.6% 2.5% 2.4% 2.8% 1.7% 1.5% 2.7%

0%

25%

50%

75%

100%

2011Avg=90.9%

n = 2,660

201289.8%

2,226

201390.6%

2,253

201490.9%

2,545

201590.8%

2,157

201690.9%

2,117

201791.7%

2,357

201890.3%

2,028

Below 50%

50 - 70%

70 - 90%

90%+

PERCENTAPPROVAL

7



• Say on Pay vote results are 31% lower at companies that receive an ISS “Against” recommendation

• The difference in vote results for companies receiving “For” and “Against” in 2018 (31%) is at the high end of the historical average of 25-30%

• The slightly wider gap this year could be an indication of increased alignment of institutional shareholder voting with ISS recommendations

• 273 companies (14.2%) received one “For” and one “Against” recommendation from ISS during the last two years

• The “Against” recommendation rate in 2018 (13.9%) is 170 basis points higher than the 2017 rate (12.2%)

• Only 5% of companies have received ISS “Against” recommendations in each of the last two years. This is 13 basis points higher than the last report

“For” “Against”

“For”81% of companies

(n=1555) 8% of companies

(n=155)

“Against”6% of companies

(n=118)5% of companies

(n=98)

2018 Rec.

2017 Rec.

1Reclassification of GICS sectors in September 2018 resulted in a shift of companies between the IT, consumer discretionary, and communication services (formerly telecommunication services) sectors.

95%

64%

0%

25%

50%

75%

100%

ISS For(n = 1,746)

ISS Against(n = 282)

2011 2018

86% 84% 79% 77% 74% 76% 71% 76% 72% 70% 60%

9% 11% 16% 15% 18% 13% 19% 13% 18% 17% 24%

5% 4% 1% 6% 5% 8% 7% 8% 7% 9% 9%

2% 3% 2% 3% 3% 3% 3% 3% 4% 7%

0%

25%

50%

75%

100%

Utilities

n = 66

Avg = 92.8%

Industrials

303

92.4%

Consumer

Staples

68

91.8%

Financials

371

90.9%

Consumer

Discretionary

261

90.3%

Materials

106

90.1%

Health Care

277

89.7%

Real Estate

153

89.2%

Information

Technology

250

89.2%

Energy

106

88.0%

Comm.

Services

67

85.7%

90%+ 70 - 90% 50 - 70% Below 50%

8

2018 Failed Say on Pay Vote Results1

Russell 3000, n=55

Likely Causes of Votes Under 50%

Number Pay and Problematic Rigor of Shareholder Non- Special

Say on Pay Vote Results of Performance Pay Performance Outreach and Performance Awards/ Mega- Benchmarking

Company 2018 q 2017 YOY Failures Relation Practices Goals Disclosure Based Equity Grants Practices

Molina Healthcare, Inc. 50% 79% -29% 1 X X

Waterstone Financial, Inc. 50% 86% -36% 1 X X

Cogent Communications Holdings, Inc. 50% 66% -17% 5 X X X

Vista Outdoor Inc. 50% 97% -48% 1 X X

Fluidigm Corporation 49% 98% -49% 1 X X X

RAIT Financial Trust 49% 92% -43% 1 X X X

AECOM 48% 52% -4% 1 X X X

USG Corporation 47% 97% -51% 1 X

Rambus Inc. 46% 77% -31% 1 X X X X

Virtus Investment Partners, Inc. 46% 66% -20% 1 X X

Mattel, Inc. 46% 92% -46% 1 X X X

Boingo Wireless, Inc. 45% 58% -13% 1 X X

Chesapeake Energy Corporation 45% 57% -12% 2 X X X X

Mondelez International, Inc. 45% 85% -41% 1 X X X

Trinseo S.A. 44% 96% -52% 1 X

Envision Healthcare Corporation 44% 52% -8% 1 X X

Commercial Metals Company 44% 95% -51% 1 X X

Black Box Corporation 44% 90% -46% 1 X

The Walt Disney Company 44% 84% -40% 1 X X

IMAX Corporation 43% 30% 13% 2 X X X X X

LivePerson, Inc. 42% 91% -49% 1 X X X X

Universal Insurance Holdings, Inc. 42% 47% -4% 2 X X X X

Digimarc Corporation 42% 75% -33% 1 X X

Halliburton Company 42% 66% -24% 1 X X X X

Tanger Factory Outlet Centers, Inc. 42% 80% -38% 1 X X

Preferred Bank 42% 98% -56% 1 X X X

Hospitality Properties Trust 42% 48% -6% 2 X

Medifast, Inc. 41% 42% -1% 3 X X

Nabors Industries Ltd. 41% 44% -3% 7 X X X

Huron Consulting Group Inc. 40% 99% -59% 1 X X

iStar Inc. 40% 87% -47% 1 X X X

Nexstar Media Group, Inc. 39% 99% -60% 1 X X X

Chicago Bridge & Iron Company N.V. 39% 75% -36% 1 X X XQualys, Inc. 39% 96% -57% 1 X X X

Tutor Perini Corporation 38% 42% -4% 8 X X X X

G-III Apparel Group, Ltd. 37% 67% -30% 2 X X X

Gentherm Incorporated 37% 91% -54% 1 X X

Whitestone REIT 36% 43% -8% 2 X X

Zoe's Kitchen, Inc. 35% 96% -60% 1 X X

FCB Financial Holdings, Inc. 33% 55% -22% 1 X X X X

New York Community Bancorp, Inc. 33% 50% -17% 3 X X X X

First Horizon National Corporation 32% 95% -63% 1 X X

Cleveland-Cliffs Inc. 32% 57% -26% 1 X X XSanmina Corporation 31% 76% -45% 1 X X X

Synergy Pharmaceuticals Inc. 29% - - 1 X X X

GenMark Diagnostics, Inc. 29% 65% -37% 1 X X X X

Ameriprise Financial, Inc. 25% 81% -56% 1 X X

Ophthotech Corporation 24% 64% -40% 1 X

Patterson-UTI Energy, Inc. 24% 97% -73% 1 X X X

Bed Bath & Beyond Inc. 21% 44% -22% 4 X X X X

Nevro Corp. 20% 82% -61% 1 X X X

Wynn Resorts, Limited 20% 59% -39% 1 X X X

Acacia Research Corporation 19% 97% -77% 2 X X

FleetCor Technologies, Inc. 14% 37% -23% 3 X X X X

Nuance Communications, Inc. 10% 33% -24% 5 X X X

Count (n=55) 34 32 15 20 24 19 6

1 As of September 30, 2018.

9

• 59% of equity proposal votes in 2018 have received above 90% support, compared to 65% in 2017

• Only 29 (0.50%) of the 5,820 equity plan proposal votes since 2011 have received less than a majority vote. In 2018, only 2 (0.39%) of the 513 equity proposal votes have received less than a majority vote

• Over the past five years, we have observed that companies that receive Say on Pay support below 70% also receive about 11 percentage points less support on equity plan votes in the same year

34%48% 52% 55%

65% 61% 65% 59%

52%

43% 38% 37%30% 31% 28%

32%

13% 8% 9% 8% 6% 8% 7% 8%0.5% 0.4% 0.6% 0.6% 0.1% 0.6% 0.6% 0.4%

0%

25%

50%

75%

100%

2011n = 632

2012n = 689

2013n = 781

2014n = 805

2015n = 786

2016n = 785

2017n = 829

2018n = 513

Below 50%50 - 70%70 - 90%90%+

PERCENT

APPROVAL

90% 92% 90% 92% 91%83%

87% 88% 85% 85%79%

83% 83% 83% 80%

0%

20%

40%

60%

80%

100%

2014n = 687

2015n = 611

2016n = 568

2017n = 680

2018n = 386

+90% Say on Pay 70% - 90% Say on Pay Below 70% Say on Pay

10

• 38 director nominees (0.24%) have received vote support below 50% in 2018 – since 2014, 237 (0.28%) of the 83,550 director nominees have received vote support below 50%

• Average director election vote support at companies that received a Say on Pay vote below 50% in the prior year is 6% lower than at companies that received above 70% vote support

• Early in the proxy season, vote support for both male and female director nominees was higher than each of the previous four years. As the season continues to progress, vote support has moved slightly below the historical average of 96% since 2014

78.3% 79.1% 78.8% 78.3% 78.6%

13.0% 14.4% 14.8% 14.7% 14.1%

4.0% 3.7% 3.5% 3.9% 4.3%3.2% 2.8% 2.9% 3.0% 3.1%

2014Avg=96.0%n=12,469

201596.6%

n=18,660

201695.9%

n=18,347

201795.7%

n=18,306

201895.6%

n=15,768

95%+ 85 - 95% 75 - 85% Below 75%

95.4%

95.7% 95.6% 95.5% 95.4%

96.7% 96.8% 96.8%96.6% 96.7%

2014n=12,469

2015n=18,660

2016n=18,347

2017n=18,306

2018n=15,768

Male Female96%

93%

90%

Above 70%Say on Pay

n=51,523

50 - 70%Say on Pay

n=2,887

Below 50%Say on Pay

n=947

11

• Four environmental (9.8%) and five social (4.9%) proposals have received greater than 50% support in 2018. Darden Restaurants’ social proposal passed with a 91% vote since our last report

• By comparison, only seven environmental (2.0%) and nine social (1.0%) proposals passed over the previous seven years combined

• Thus far in 2018, the median support for environmental proposals is slightly higher than last year, while median support for social proposals is 935 basis points higher than the median support observed in 2017

An undisclosed shareholder submitted a proposal that would require General Mills to disclose quantitative metrics on pesticide use in the Company’s supply chain.

• The proposal received 31% support and did not pass

• The proponents of the proposal stated that General Mills is exposing itself to reputational risk by failing to disclose quantitative information on pesticide use in its supply chain

• In addition, the proponents noted that the company has received negative media attention for its “save the bees” media campaign due to its lack of focus on reducing herbicides and pesticides

• The company’s Board recommended that shareholders vote “Against” the proposal because the company already reports on research efforts focused on bees and other pollinators and the effects of pesticides on their habitats. The Board also explains that the company has committed to doubling its organic acreage by the end of 2019 and providing a regional educational hub for organic farmers in partnership with Midwestern BioAg

• ISS recommended shareholders vote “For” the proposal because the company does not currently disclose information about pesticide use in its supply chain; further, ISS stated shareholders would benefit from the company disclosing pesticide statistics as pesticides receive more public scrutiny

20% 19%23% 22% 23%

26% 28%30%

2011n = 39

2012n = 29

2013n = 28

2014n = 45

2015n = 64

2016n = 75

2017n = 67

2018n = 41

20%16%

22% 21% 20% 18% 17%

26%

2011n = 101

2012n = 115

2013n = 122

2014n = 142

2015n = 128

2016n = 132

2017n = 120

2018n = 103

12

FOR MORE I N F O R M A T I O N , V I S I T U S A T S E M L E R B R O S S Y . C O M

SEMLER BROSSY CONSULTING GROUP

11755 WILSHIRE BOULEVARD, 10TH FLOOR

LOS ANGELES, CA 90025

310.481.0180 | [email protected]© 2018 S E M L E R B R O S S Y C O N S U L T I N G G R O U P L L C

2018 ESG Proposals Since Last Report1

Recommendation

Company Proposal ISS Management Support q Result

Environmental Proposals (n=2)

Michael Kors Holdings Ltd. Assess Feasibility of Adopting Quantitative Renewable Energy Goals For Against 45% Fail

General Mills, Inc. Report on Impact of Pesticides on Pollinators For Against 31% Fail

Social Proposals (n=4)

Darden Restaurants, Inc. Assess Feasibility of Adopting a Policy to Phase Out Use of Antibiotics For Against 91% Pass

McKesson Corp. Report on Lobbying Payments and Policy For Against 39% Fail

NIKE, Inc. Report on Political Contributions Disclosure For Against 27% Fail

FedEx Corp. Report on Lobbying Payments and Policy For Against 26% Fail

1 As of September 30, 2018.

http://semlerbrossy.com/

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