TIAA
July 9
TIAA President and CEO Roger Ferguson had a total compensation of $22,399,082 in 2020, including increases in both his annual bonus and Non-Equity Incentive Compensation. Notably, his NEIC alone is valued at $14,494,082. In a recent review of executive compensation by the Wall Street Journal, Ferguson’s pay was approximately as high as the 65th highest paid S&P 500 company CEO.
I wrote about TIAA‘s unique situation last year. While other companies have investors vote on compensation, TIAA has allowed its individual participants to vote on compensation. The company provides a lengthy Compensation Disclosure that was sent to participants on June 4 along with a ballot. That email provides links for voting the ballot and states:
“You may also give written commentary providing insight on your advisory vote by accessing the following website at https://www.tiaa.org/public/secure/proxy/exec_comp or by sending your written commentary to the TIAA Board of Governors, c/o Corporate Secretary's Office TIAA, 730 Third Avenue, New York, New York 10017-3206. Your written commentary must be received by 9:00 a.m. (ET) on July 9, 2021.”
It should be noted that the company requires disclosure of personal information in order to submit such comments. A participant of TIAA forwarded this information to me. There are several items of concern I wanted to highlight:
· Generous package for retiring CEO. The company entered into a consulting arrangement with Ferguson where he will be paid $750,000 to “be available to assist with transition for the 12-month period beginning on May 1, 2021.” There is no stipulation on the amount of time he will contribute to the transition over the course of the year.
· Generous additional benefits for retiring CEO. TIAA will provide Ferguson with company office space, an annual payment of $100,000 “to cover his costs for administrative support,” and continued technology support from TIAA until he is 75 or reaches an employment agreement that provides “similar benefits.” TIAA says both the consulting agreement and this payment are “consistent with the benefit traditionally offered to retiring CEOs.” It is not clear whether the company is stating that its compensation decisions are consistent with its own past practices or with what is offered elsewhere. Large companies did occasionally offer such packages, but they have become increasingly rare as shareholders have stridently opposed them.
· Generous new hire package for Thasunda Brown Duckett (President and CEO of TIAA as of May 1, 2021). The company agreed to the following: “With respect to forfeited outstanding equity awards with her former employer, Ms. Duckett will receive a cash payment of $4,272,000 payable in February 2022, a LTPP award with an initial value of $3,077,000 vesting in February 2023 and a LTPP award with an initial value of $3,346,000 vesting in February 2024. With respect to the forfeited bonus opportunity with her former employer, Ms. Duckett received a cash payment of $2,166,667 on her start date and a LTPP award with an initial value of $3,250,000 vesting in February 2024.”
· Extraordinarily high targets for bonuses. TIAA notes that the target pay of Brown Duckett’s annual cash award and LTPP award are set at 520% and 780% of salary, respectively. While it is common to measure potential bonuses as multiples of salary, most S&P 500 companies set the target between 150-300%. I cannot recall seeing any bonus target set at 780% of salary.
There are many other concerns that participants may wish to raise, as noted last year. The company’s peer choice seems inappropriate considering that it is not a public company. The total median associate pay of $150,318 is quite high compared to that of other companies and has increased more than $9,000 since 2019. The company also reports that the number of total associates has decreased from 16,629 at the start of 2020 to 15,066 at the start of 2021. Therefore, it is unclear if pay per associate truly increased or if more lower-paid associates left the company.
Finally, as I noted last year, TIAA is more likely to approve the packages of overpaid CEOs than most public pension funds. As can be seen in our most recent annual report of the 100 Most Overpaid CEOs, last year TIAA-CREF Asset Management voted against pay at only 9.5% of S&P 500 companies. Perhaps blinded by their own excessively paid executives, TIAA may not recognize as much as its participants how such bloated compensation is critical issue that contributes to income inequality.