Repeat offenders: Companies w high shareholder opposition to pay in 2021 and 2022

In my last blog I took a look at some of the largest pay vote failures of 2022. This summer I also looked at companies that had high opposition and/or failed votes in 2021 to see how they did in 2022. There were six companies that had fairly high opposition to pay in 2021 that saw opposition actually increase in 2022.

In many cases when shareholders voted against pay at a company for a second time, the company was criticized not simply for the fact that they did not address problematic issues, but for the fact that they failed to engage. Shareholders cannot abide by disdain.

Netflix has an unusual and excessive pay structure that allows executives to choose whether to get large sums of cash or fully-vested option grants. Shareholders have been frustrated with this for years, and Netflix continues to disregard their frustration. The company says it solicited feedback from shareholders but that the Compensation Committee continues “to believe our compensation philosophy and structure align with stockholder interests and best incentivize the executive officers.” The argument about alignment is particularly difficult to comprehend since the idea of stock ownership and shared future is fundamental to the typical understanding of alignment. Opposition at Netflix increased from 49.32% opposition to 73% opposition.

Wynn was another company where shareholders highlighted the failure to respond to the prior year’s vote. Shareholders contended that the company “demonstrated poor responsiveness to low vote support for the 2021 say-on-pay proposal.” In my next blog post I will be looking at companies where actions taken resulted in more support in 2022, and include examples of responsiveness. These days it seems like every proxy includes at a minimum some percentage of shareholders engaged (which may be ultimately meaningless) but Wynn simply noted that it had met with “several shareholders.”

CEO pay was down significantly at Wynn – from over $24 million to around $10 million, but opposition level increased. CEO Matt Maddox left the company on January 31, 2022, and was replaced by Craig Billings, who had been at Wynn for five years and was subsequently named CEO. Shareholders objected to the incoming CEO’s equity grants, one of which was entirely time-based and did not include performance vesting. They also expressed concern regarding transition payments made to the former CEO.

Lowering CEO pay was also not a sufficient reason for shareholders to change their opposition at Norwegian Cruise Lines. In fact, more shareholders voted against in 2022 than in 2021. Some commented that while the absolute amount of pay had declined for the year it was still above that of peers, and the company did not make sufficient commitments for the future.

There was also a dramatic change in total compensation at Paycom: after an extraordinary grant in 2020 that lifted pay to $211 million, 69.7 percent of shareholders voted against the package. In addition to committing to avoiding special mega-grants in the future, Paycom replaced Compensation Committee members, engaged with shareholders and improved disclosure. Those changes were enough to persuade several shareholders (including Vanguard and State Street) to switch votes from the prior year and support pay at the company at the 2022 meeting. However, a majority of shareholders – 50.7% -- voted against pay once again, believing that the overall structural issues with compensation remained a problem and the company had not been sufficiently responsive.

At Howmet, CEO pay also declined – from $39M to $17M -- but the opposition only went down a small amount. Despite the fact that they had two failed annual votes in a row, the committee “demonstrated only limited responsiveness. Although details of shareholder engagements and feedback are disclosed, the committee did not make changes to executive pay programs to address investor concerns.” Instead, CEO John Plant received a “special” equity grant for the third year in a row and also signed an agreement with the company that includes a generous severance package.

At Intel, total compensation for the CEO increased dramatically, when the company offered Pat Gelsinger one-time new-hire equity awards with a target value of approximately $110 million. Intel did the sort of engagement that others had not, identifying the percentage by season of the number of shareholders contacts, the number engaged and the number engaged by directors. In its proxy statement the company notes that most voted against “on concerns regarding the quantum and the structure of the new-hire equity awards granted to Intel’s new CEO, even though the awards were not included in last year’s Summary Compensation Table.” The increase in votes this year may reflect primarily the eye-popping numbers of the award.