Investor opposition to U.S. CEO pay at its highest ever -report
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[May 24, 2021] By
Jessica DiNapoli
NEW YORK (Reuters) - Investors have
rejected a record number of executive compensation plans in non-binding
votes of U.S.-listed companies this year, objecting to pay rises and the
easing of performance targets in the wake of the COVID-19 pandemic,
according to an analysis by consulting firm ISS Corporate Solutions.
Some companies have argued that protecting executive pay in a downturn
is necessary to keep top managers incentivized, given the crucial role
they play in steering their business. That idea has been increasingly
met with skepticism from investors who say that the shifting of
performance goalposts is unwarranted and demoralizes employees who are
not shielded in the same way.
A record 14 S&P 500 companies had more than 50% of investors reject
executive pay packages so far this year. That number is set to rise as
more executives face votes in the coming weeks, according to ISS
Corporate Solutions. Investors voted down a total of 12 CEO pay plans in
2020.
"We still have 200 or more meetings to go, and we are likely to see more
failures," said Brian Johnson, an executive director at ISS Corporate
Solutions.
The record was reached last week, when 53% of shareholders invested in
oilfield services firm Halliburton Co voted down CEO Jeff Miller's $22.3
million pay plan, which is roughly $10 million more than he earned in
2019.
Cruise ship operator Norwegian Cruise Line Holdings Ltd also faced a
defeat from its investors on executive pay plans on Thursday, according
to a securities filing.
Investors this year have also rejected executive pay plans at industrial
company General Electric Co, coffee retailer Starbucks Corp and chip
maker Intel Corp.
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A worker arrives at his office in the Canary Wharf business district
in London February 26, 2014. REUTERS/Eddie Keogh/File Photo
Losing the shareholder vote can put pressure on corporate boards and executives
to negotiate new pay deals. Roughly two years ago, Walt Disney Co renegotiated
the compensation of its chief executive at the time, Bob Iger, to toughen his
performance targets after shareholders voted down his pay.
Roughly 10.6% of companies changed short-term incentive programs in the pay
plans, and 3.3% adjusted long-term awards, ISS Corporate Solutions found,
bolstering executive pay in many cases.
In most years, "investors almost uniformly reject those changes because you're
completely disrupting the link between pay and performance," Johnson said.
Pay plans at companies that underperformed financially, such as Phillips 66 and
Walgreens Boots Alliance Inc, were also rejected by investors, Johnson said.
ISS Corporate Solutions found that automobile and auto part makers, real estate
firms and technology hardware and equipment companies changed pay the most
during the year compared to other industries.
(Reporting by Jessica DiNapoli in New York; Editing by Aurora Ellis)
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