Do Shareholders Have a Say on Say-on-Pay?

Summary

Say-on-pay (SOP) votes — advisory votes on the prior year’s executive pay — continue to pass at unexpectedly high rates despite public criticism of rising CEO compensation. Egan-Jones note that only four S&P 500 companies failed SOP votes in 2024 and, as of 26 June 2025, only five had failed in 2025. The authors argue this gap between public concern and voting outcomes stems from concentrated influence among proxy advisors and large asset managers, and they propose wider use of pass-through voting and genuinely independent proxy-advice services to make outcomes more reflective of underlying investors’ interests.

Content summary

SOP votes are advisory but can send a strong signal when a meaningful minority votes against. Despite mounting public concern about excessive CEO pay and continued pay growth, SOP proposals overwhelmingly pass at S&P 500 companies. That suggests either shareholders aren’t broadly worried or that voting mechanisms and intermediaries mute those concerns.

Egan-Jones point to the outsized role of a few proxy-advisory firms and the largest asset managers in shaping outcomes. They recommend two fixes: broader adoption of pass-through voting (so underlying investors directly control votes) and independent, unconflicted proxy-advice. Their own policies (Standard/Blended and Wealth-Focused) opposed SOP proposals more than 30% of the time in 2024 (38% and 34% respectively), reflecting a stricter investor-value focus. The memo also reiterates a simple compensation principle: CEOs should be paid to drive above-average shareholder returns and not rewarded for poor performance.

Context and relevance

This piece matters to investors, asset managers, pension funds, RIAs, corporate boards and governance professionals because it highlights structural frictions in shareholder voting and stewardship. It ties into broader trends: rising executive pay, increasing scrutiny of stewardship practices, and debates over the independence and revenue models of proxy-advice firms. The recommendations, if adopted more widely, could shift who actually controls votes and how executive pay is policed.

Key Points

SOP proposals are advisory but usually pass overwhelmingly; only four S&P 500 companies failed SOP in 2024 and five had failed by 26 June 2025.
High pass rates may reflect either genuine investor acceptance of pay levels or that investor concerns aren’t making it into the votes cast.
A small number of proxy-advisory firms and the largest asset managers exert considerable influence on SOP outcomes.
Pass-through voting gives underlying investors direct control of votes and can align outcomes more closely with investor preferences.
Proxy advice must be independent and free from issuer-related conflicts to be credible; revenue from issuers can compromise objectivity.
Egan-Jones’ policies opposed SOP proposals over 30% of the time in 2024 (Standard/Blended 38%, Wealth-Focused 34%), emphasising shareholder-value protection.
Principle: CEOs should be rewarded for driving above-average shareholder returns; poor returns should not be matched with above-average pay.

Why should I read this?

Short version: if you care about who really controls votes on executive pay, this memo tells you why the current system often spits out pro-pay results and how to fix it. We’ve read the detail so you don’t have to — the headline fixes are simple (pass-through voting, clean proxy advice) and could actually change outcomes if put into practice. Good to know whether you manage money, vote shares, or sit on a remuneration committee.