Transparency in Pay Evaluation: Adoption of Abstain as a Vote Option on Management Compensation Resolutions

• State Street Global Advisors’ Asset Stewardship Team adds an ‘Abstain’ option for proxy votes on management compensation.
• The addition is intended to promote further engagement on pay proposals.

Key Takeaways

• Ahead of the 2018 proxy season, State Street Global Advisors announced that in addition to the use of ‘For’ and ‘Against’ vote options on management compensation resolutions we will introduce an ‘Abstain’ vote, in situations when we cannot provide unqualified support for compensation proposals globally.
• We believe that this change will result in companies being more responsive to our vote on pay proposals and subsequent engagement efforts, thereby improving impact.
• We cannot predict all instances when we will use an ‘Abstain’ vote but based on past practice typical cases would include:

– Large one-time payments that cannot be justified or explained

– Lack of adequate disclosure or some concerns with performance metrics but recognition of strong long-term performance etc.

– Where companies have responded to some but not all of our concerns.

• There will be no change to State Street Global Advisors’ Asset Stewardship Team’s evaluation of compensation votes.