Investors want to vote on companies pay practices on an annual basis despite some management proposals from last season that recommended using biennial or triennial voting, according to proxy advisory firm ISS' 2011 U.S. Post-Season Report.

The ISS study of past proxy season results revealed that investors overwhelmingly support an annual vote for future seasons. As of Sept. 1, 80.1 percent of Russell 3000 companies said they preferred an annual vote. In comparison, just 18.5 percent supported a triennial vote.

At the same time, management recommendations on the vote frequency have also shifted throughout the proxy season. Following investor support for annual frequency, management switched their recommendations from triennial to annual votes. 51.6 percent of Russell 3000 companies with annual meetings prior to Sept. 1 recommended an annual vote, while 43.6 percent of opted for a triennial vote. Preference for biennial votes decreased throughout the proxy season to 2.3 percent, while another 2.3 percent of companies made no recommendation. 

ISS also found that management recommendations have little or no influence on the outcome of these frequency votes. Throughout all the meetings occurring before Sept. 1, 538 out of 892 companies (60.3 percent) reported that investors shunned management recommendations for triennial votes. Shareholders also ignored biennial recommendations in 34 out of 47 companies. The study also finds that when compared side by side, the annual vote pattern receives a higher support rate than the three-year vote. In addition, ISS said shareholders clearly preferred an annual vote  when management made no recommendation.

Another interesting finding from the ISS study is the two rebel companies that completely ignored shareholder vote recommendations. While most U.S. companies have stated their willingness to heed shareholders' preference on vote frequency, Annaly Capital Management and American Reprographics said they will hold triennial votes despite majority support from investors to have an annual vote on say-on-pay.

As of Sept. 1, annual votes have garnered majority support at 958 companies in the Russell 3000 index, as compared to 354 triennial votes, and just 13 biennial votes. The Dodd-Frank Act requires that the proxy following the first annual shareholder meeting after the enactment of the say-on-pay rule must include an additional advisory vote to determine the frequency of future advisory votes on pay. This must occur every six years.

Other key takeaways from the study include:

Companies' pay programs received majority support from investors (average 92.1 percent); only 38 companies failed to get support for their pay proposal

Say-on-pay increased investor workloads but spurred greater engagement by companies and prompted changes in companies' pay practices

Majority opposition against board members is due to poor attendance at meetings, a failure to stop shareholders' negative votes, and a failure to meet the majority shareholder demands

Shareholders are more active in seeking board declassification. 73.5 percent of shareholders supported the proposal, up 12 percent from 2010. The proposal also won majority support in 22 of 23 large-cap companies

Fewer shareholder proposals to oppose super-majority rules; more management proposals on the ballot

Investor support for shareholder resolutions on environmental and social issues continue to rise (20.6 percent approval rate in 2011, with five proposals receiving majority votes)