Nine S&P 500 companies have failed say on pay as of May 29, which exceeds the total number of seven for all of 2019 and each of the prior years except 2012. In the past, S&P 500 companies have enjoyed more say-on-pay support than smaller companies, but this may be changing.

Reasons for failures. Reasons some investors cited for voting against say on pay at the nine S&P 500 company failures, aggregated by Proxy Insight, were driven by pay-for-performance disconnects, including:

• Modification of performance targets to make them easier to achieve

• Lack of quantifiable (vs qualitative) performance metrics

• Lack of transparency around performance goals, lack of goal rigor, and/or use of discretion

• One-off equity grants, especially when not sufficiently performance-based

• Mega grants covering current and future years

• Payment of cash severance on retirement in lieu of forfeited equity

No other surprises despite pandemic. Executive pay decisions for 2019 predated the market gyrations brought on by the COVID-19 pandemic and say-on-pay vote results have been generally unaffected. Most indicators of shareholder support remain strong so far and consistent with prior years:

• Out of 1,729 all-size companies reporting results, 43 (2.5%) have received less than 50% support, a higher rate than 47 out of about 2,100 (2.2%) as of June 12, 2019

• Votes continue to average about 91% in favor of companies’ executive pay programs

• Favorable votes of 90% or higher at individual companies are similar to last year (down slightly from 77% in 2019 to 76% in 2020 for S&P 500 companies, and up slightly from 73% to 75% for all companies)

• ISS has recommended shareholders vote against fewer say-on-pay proposals (10% so far this year compared with 13% as of June 12, 2019 and 14% for all of 2019)

The number of S&P 500 companies whose executive pay plans failed to receive majority support from shareholders is up compared to last year.

pay & governance

S&P 500 say-on-pay failures increase

S&P 500 say-on-pay failures increase 22

Looking ahead

The reasons for the say-on-pay failures indicate areas of concern investors are likely to focus on when they next vote on say on pay, including actions companies take to address the volatile market and global pandemic. Companies with June 30 fiscal year ends will be the first to see the impact, and should engage with shareholders and ensure their proxy disclosure explains the rationale for pay decisions. See Managing incentives during uncertain times for a discussion of 2020 compensation decisions in response to COVID-19 and Proxy advisers weigh in on COVID-19’s impact on pay and governance.

EXHIBITS1. Say-on-pay summary results: % in favor, 2011 to 2020

2. Companies with 2020 say-on-pay failures and 2019 results

3. Companies with 2019 say-on-pay failures and 2020 results

4. ISS influence on vote results, 2011 to 2020

5. Number of companies failed say-on-pay at least once since 2011

EXHIBIT 1

Say-on-pay summary results, 2011 to 2020 (as of May 29, 2020)

“All-Size Companies” is all companies followed by ISS where SOP vote results have been reported in US proxies. 2011-2017 vote results are reported as a % of total votes in favor plus votes against, not including abstentions or broker non-votes. 2018-2020 vote results are based on how companies compute and report their percentages, which may count abstentions and/or broker non-votes as “against”.

S&P 500 say-on-pay failures increase 3

EXHIBIT 2

Companies with 2020 say-on-pay failures and prior-year results (as of May 29, 2020)

Votes “for” the following companies’ say-on-pay (SOP) proposals came to less than 50% (as indicated by shading) of total votes cast in 2020. Percentages shown are based on how companies compute and report their vote results, which may count abstentions and/or broker non-votes as “against.”

% in favorCompanies Ticker 2020 2019Acuity Brands, Inc. AYI 33.1% 53.3%Altria Group, Inc. * MO 49.3% 94.5%Assertio Therapeutics, Inc. ASRT 32.0% 96.3%Associated Banc-Corp ASB 36.9% 94.4%Bunge Limited BG 41.1% 82.3%Cassava Sciences, Inc. SAVA 39.0% 54.0%CIM Commercial Trust Corporation CMCT 46.7% 99.4%Cleveland-Cliffs, Inc. CLF 32.4% 69.9%Colony Capital, Inc. CLNY 42.2% 69.1%CryoPort, Inc. CYRX 35.6% 53.7%CVS Health Corporation * CVS 24.3% 90.4%Daseke, Inc. DSKE 24.5% 95.7%Digimarc Corporation DMRC 29.2% 47.5%Everbridge, Inc. EVBG 48.4% 98.0%Federal Realty Investment Trust * FRT 41.6% 92.6%Fidelity National Information Services, Inc. * FIS 45.6% 93.1%FreightCar America, Inc. RAIL 43.3% 93.6%Home BancShares, Inc. HOMB 45.9% 92.4%Intel Corporation * INTC 49.7% 59.8%Investors Bancorp, Inc. ISBC 46.0% 93.6%IQVIA Holdings, Inc. * IQV 46.1% --Kilroy Realty Corporation KRC 49.2% 15.4%Laredo Petroleum, Inc. LPI 42.5% 67.9%Mallinckrodt Plc MNK 37.6% 36.6%Medpace Holdings, Inc. MEDP 32.8% --National Holdings Corporation NHLD 17.3% 54.3%Noble Corp. Plc NE 49.6% 56.2%NXP Semiconductors NV NXPI 36.2% --Paycom Software, Inc. * PAYC 45.0% 90.1%Penns Woods Bancorp, Inc. PWOD 48.9% 54.0%QUALCOMM Incorporated * QCOM 17.9% 79.4%SPAR Group, Inc. SGRP 3.2% 4.6%SS&C Technologies Holdings, Inc. SSNC 41.7% 42.0%Tandem Diabetes Care, Inc. TNDM 44.6% 50.5%Titan Pharmaceuticals, Inc. TTNP 37.1% --Tribune Publishing Company TPCO 32.6% 99.7%Tutor Perini Corporation TPC 34.4% 36.6%U.S. Silica Holdings, Inc. SLCA 29.8% 95.0%USA Technologies, Inc. USAT 16.5% --Vector Group Ltd. VGR 31.3% 49.1%Vornado Realty Trust * VNO 42.8% 65.3%Westwood Holdings Group, Inc. WHG 49.0% 64.3%Zovio, Inc. ZVO 45.4% --Total failures: 43 Average change (for companies with data for both years) -32%

* Company is included in S&P 500 Index.

1 Company failed despite ISS “for” recommendation

S&P 500 say-on-pay failures increase 44

EXHIBIT 3

Companies with 2019 say-on-pay failures and 2020 results (as of May 29, 2020)

Votes “for” the following companies’ say-on-pay (SOP) proposals came to less than 50% (as indicated by shading) of total votes cast in 2019. Percentages shown are based on how companies compute and report their vote results, which may count abstentions and/or broker non-votes as “against.”

Support in 2020 following 2019 failure

% in favor % in favorCompanies Ticker 2020 2019 Companies Ticker 2020 20192U, Inc. TWOU -- 38.3% Motorcar Parts of America, Inc. MPAA -- 40.2%Accuray Incorporated ARAY -- 10.5% Nabors Industries Ltd. NBR -- 47.3%Adamis Pharmaceuticals Corporation

ADMP -- 27.2% NCR Corp. NCR 84.7% 36.2%

Advaxis, Inc. ADXS 50.7% 49.0% Netflix, Inc. * NFLX -- 49.8%AGCO Corp. AGCO 77.2% 33.1% Nexstar Media Group, Inc. NXST -- 48.9%Align Technology, Inc. * ALGN 89.4% 42.5% Nuance Communications, Inc. NUAN 91.8% 47.0%Alkermes Plc ALKS 69.7% 35.2% Palo Alto Networks, Inc. PANW -- 17.6%American Outdoor Brands Corporation

AOBC -- 37.0% PeerStream, Inc. PEER -- 19.2%1

Ameriprise Financial, Inc. * AMP 89.2% 33.9% Predictive Oncology, Inc. POAI -- 33.9% 1

Applied Optoelectronics, Inc. AAOI -- 47.5% Proofpoint, Inc. PFPT -- 18.2%ASGN, Inc. ASGN -- 35.7% PTC, Inc. PTC 67.2% 41.7%Aspen Technology, Inc. AZPN -- 34.0% Puma Biotechnology, Inc. PBYI -- 27.4%At Home Group, Inc. HOME -- 49.6% QEP Resources, Inc. QEP 83.8% 47.2%Avaya Holdings Corp. AVYA 96.1% 49.9% Rayonier Advanced Materials, Inc. RYAM 77.8% 39.6%Boston Beer Co., Inc. SAM 96.8% 44.2% Real Goods Solar, Inc. RGSE -- 41.1% 1

CenturyLink, Inc. * CTL 74.4% 40.6% SandRidge Energy, Inc. SD -- 19.1%Citizens, Inc. (Austin, Texas) CIA -- 44.4% ServiceSource International, Inc. SREV 97.4% 35.3%CUI Global, Inc. CUI -- 41.1% Signature Bank SBNY 93.6% 38.3%Diebold Nixdorf, Inc. DBD 88.0% 46.4% South Jersey Industries, Inc. SJI 96.8% 44.7%Digimarc Corp. DMRC 29.2% 47.5% SPAR Group, Inc. SGRP 3.2% 4.6% 1

Ennis, Inc. EBF -- 43.7% SS&C Technologies Holdings, Inc. SSNC 41.7% 42.0%FleetCor Technologies, Inc. * FLT -- 25.7% The Middleby Corp. MIDD -- 46.2%Frontier Communications Corp. FTR -- 43.7% Tribune Media Company TRCO -- 49.4%FuelCell Energy, Inc. FCEL 85.6% 48.4% Tutor Perini Corp. TPC 34.4% 36.6%Gannett Co., Inc. GCI -- 23.7% Tyler Technologies, Inc. TYL 94.5% 47.4%HC2 Holdings, Inc. HCHC -- 48.8% United Therapeutics Corp. UTHR -- 26.9%Hercules Capital, Inc. HTGC -- 47.5% Varonis Systems, Inc. VRNS 92.9% 33.4%IMAX Corp. IMAX -- 39.3% Vector Group Ltd. VGR 31.3% 49.1%ImmunoGen, Inc. IMGN -- 9.6% Vista Outdoor, Inc. VSTO -- 40.1%iStar, Inc. STAR -- 43.2% Westwater Resources, Inc. WWR 74.0% 46.7%Kilroy Realty Corp. KRC 49.2% 15.4% Wheeler Real Estate Investment

Trust, Inc.WHLR 91.0% 13.2%

LendingClub Corp. LC -- 45.8% Willdan Group, Inc. WLDN -- 45.5%Mallinckrodt Plc MNK 37.6% 36.6% Williams-Sonoma, Inc. WSM -- 39.6%McKesson Corporation * MCK -- 40.4% Xerox Corp. * XRX 66.2% 40.2%MEDNAX, Inc. MD -- 12.6% Xperi Corp. XPER -- 38.0%

Total Failures: 70Average change (for companies with data for both years):2019 – 2020: 33% * Company is included in S&P 500 Index.

1 Company failed despite ISS “for” recommendation

S&P 500 say-on-pay failures increase 5

EXHIBIT 4

ISS say-on-pay recommendations and vote results, 2011-2020 (as of May 29, 2020)

EXHIBIT 5

Number of companies that failed say-on-pay at least once since 2011 (as of May 29, 2020)

Number of years failed Number of companies (all)

Number of S&P 500 companies

Number of companies other than S&P 500

1 365 46 319

2 56 5 51

3 12 1 11

4 5 2 3

5 3 0 3

6 3 1 2

7 1 0 1

8 0 0 0

9 0 0 0

10 1 0 1

Total 446 55 391

Authors

Carol Silverman Partner, Senior Legal Consultant carol.silverman@mercer.com

Amy Knieriem Senior Principal, Senior Legal Consultant amy.knieriem@mercer.com

Adam Bogucki Principal, Executive Compensation Consultant adam.bogucki@mercer.com

Michael Yoon Senior Analyst, Career michael.yoon@mercer.com