A fifth U.S. company, FirstMerit Corp., has failed to win majority approval from shareholders for its executive pay practices this year. In a regulatory filing, the Ohio-based financial firm reported that it received 46.6 percent support (based on votes cast "for" and "against") during the say-on-pay advisory vote at its April 18 annual meeting. 

It appears that investors had concerns over a pay-for-performance disconnect. While the company's one-, three-, and five-year share returns were negative, the CEO’s total 2011 compensation of $6.4 million was 2.3 times higher than the median of ISS' peer group, according to the ISS report on the company. In addition, FirstMerit lacks a predominantly performance-based pay structure and robust disclosure that details the rationale for the maximum bonus payout for the CEO, the ISS report said. 

So far this year, four other U.S. companies (Citigroup, KB Home, International Game Technology, and Actuant Corp.) have failed to receive majority investor support on their compensation practices, according to ISS data. During this same period in 2011, four companies reported failed say-on-pay votes. 

Notwithstanding these votes, most U.S. companies continue to win broad investor approval on compensation. During the early 2012 proxy season, the average shareholder support during say-on-pay votes was 90.3 percent at Russell 3000 firms, which is close to the 92 percent average in 2011, according to ISS data. 

During all of 2011, 41 Russell 3000 companies reported that they failed to win majority support on compensation. That total still is less than 2 percent of the firms that held advisory votes on pay that year, according to ISS data.

The early vote results this year also suggest that many investors are responding to engagement and pay practice changes that companies are making in response to low votes in 2011. For instance, the four U.S. companies with failed pay votes during the early 2011 proxy season all made changes to their compensation policies and earned significantly more shareholder support this year. At Hewlett-Packard, say-on-pay approval jumped from 48.7 to 78.8 percent. At ShuffleMaster, the company received 86.4 percent support this year, up from 44.5 percent in 2011. Beazer Homes USA and Jacobs Engineering Group both won more than 96 percent approval this year after failed votes in 2011. 
 
For an analysis of the factors that contributed to shareholder opposition during 2011 pay votes, please see a recent ISS white paper, "Parsing The Vote: CEO Pay Characteristics Relative to Shareholder Dissent."