Are CEOs of large US companies overpaid? Unfair example of income inequality?
Several folks have complained to me lately that corporate titans are getting paid unfairly while the little guy gets stepped on. So who should care about executive compensation?
How about the folks who essentially pay them, the stockholders. The news below, when you really think about it is, out of 250 major companies all but 23 have had votes where the owners of the companies overwhelmingly think the pay is "right". And if any of them don't like they always have the option of selling their stock and investing in something better.
How about the folks at the bottom of the pay ladder. They can leave too in search of better wages somewhere else.
Or they are free to listen to Bernie Sanders who tells them what he "thinks" is the right salary for them. I guess he's the wizard behind the curtain who gets to decide.
Maybe if the CEOs of these companies are good, there's no need to call Larry the Liquidator.
Investors Protest Executive Pay at JPMorgan, Intel and Coca-Cola
Nonbinding ‘say on pay’ votes against compensation packages for chief executives are aimed at influencing board decisions
By Theo Francis, WSJ
May 19, 2022 5:30 am ET
Investors have rebuked two dozen major U.S. companies over their executive-pay packages, sometimes by wide margins or for the second straight year.
JPMorgan Chase JPM -0.73%▼ & Co. and Intel Corp. INTC 0.04%▲ investors owning roughly two-thirds of shares didn’t support pay plans at recent annual meetings. Coca-Cola Co. KO -1.03%▼ barely won majority support with 50.5% of the vote this year.
Historically, it is unusual for companies to get less than 90% support on these nonbinding votes, and corporate-governance analysts consider less than 70% support to reflect significant investor dissatisfaction.
So far, 23 companies in the S&P 500 have reported less than 70% support for their executive-compensation programs, compared with 21 among the same companies a year ago, compensation-data firm Equilar found in an analysis of about 250 companies.
The median pay package in 2021 for chief executive officers of S&P 500 companies was $14.7 million, a sixth straight record, according to The Wall Street Journal’s annual analysis. Stock awards, whose value can rise or fall, accounted for the bulk of the compensation, especially for the highest-paid leaders in the Journal’s 2021 rankings.
The scrutiny on executive compensation practices is part of a broader trend as investors emphasize environmental, social and corporate-governance—or ESG—issues, said Sara Mahaffy, ESG strategist for RBC Capital Markets. Her firm estimates that $1.4 trillion in assets globally are managed by stock funds that heavily emphasize ESG criteria when making investment decisions.
Nine CEOs got pay packages of at least $50 million last year, compared with one in 2016, according to the Journal’s analysis. Such unusual or large one-time awards are drawing more attention, said Caitlin McSherry, director of investment stewardship at the investment manager Neuberger Berman. “It’s something shareholders will be looking for more, the philosophy around one-off awards,” she said.
At JPMorgan, 31% of shares were voted in favor of the bank’s pay plans, as investors objected to a $50 million retention bonus for CEO Jamie Dimon. Including the special bonus, Mr. Dimon’s 2021 compensation totaled $84.4 million, putting him among the highest-paid CEOs in the S&P 500 for the year. (See the full WSJ ranking.)
The bonus is in options that require shares to trade above certain levels and for Mr. Dimon to remain CEO until 2026. The bank and directors said the award was to clarify that Mr. Dimon would remain in his position for several more years.
Institutional Shareholder Services Inc. and Glass Lewis & Co., two firms that advise shareholders on voting, had both recommended voting against the pay package, because of the retention bonus and a smaller grant given to Daniel Pinto, the president and chief operating officer. ISS said the awards weren’t tied closely enough to the bank’s performance. The vote isn’t binding, and Mr. Dimon isn’t expected to return the special award.
“Say on pay” votes have been mandatory for large U.S.-listed companies since 2011 and are purely advisory. Still, most boards respond to a poor showing by canvassing major investors for their concerns and often tweaking pay packages.
Just over a third of Intel shares supported the company’s executive pay policies at the annual shareholder meeting on May 12. Last year, 38% did.
Intel changed CEOs and brought in Pat Gelsinger in February 2021. The company awarded him a pay package of $178.6 million for 2021, much of it in stock and option awards that vest over three to five years and are contingent on increases in its share price.
Intel said the stock awards were based on Mr. Gelsinger’s experience, the challenge of leading a turnaround and his forfeiting approximately $50 million in equity awards from his previous job. Intel said that Mr. Gelsinger’s 2022 target total direct compensation will drop to $26.3 million, though his actual pay package could be larger or smaller depending on company performance.
An Intel spokeswoman said the company has taken steps to address investors’ feedback on compensation, although “clearly there is more work to be done.” She said 73% of Mr. Gelsinger’s equity awards are performance-based.
At Coca-Cola, shareholder support for its executive-pay program declined sharply, falling to 50.5% from 94% a year ago.
ISS said the company didn’t adequately explain a special award for CEO James Quincey, valued by the company at about $3.2 million. Mr. Quincey received a pay package valued at $24.9 million in 2021, up 35% from a year earlier. ISS also criticized Coke’s decision to pay $9.3 million in cash and consulting fees to the company’s former general counsel.
Coca-Cola declined to comment.
About two-thirds of GE’s shares were voted to support its pay program this year, up from 42% in 2021. Last year investors criticized special equity awards for top executives during 2020, including a stock grant for CEO Larry Culp that the company initially valued at $57.1 million.
This year, ISS said the company had proved responsive to shareholders’ concerns by lowering Mr. Culp’s 2022 target equity grant and promising not to adjust performance measures for equity awards that had already been made. GE reported Mr. Culp’s pay package at $22.7 million in 2021, down 69% from 2020.
“Overall, we thought the company had really made an effort to listen to shareholders—it did take some steps to be responsive,” said Neuberger Berman’s Ms. McSherry.
ISS again recommended a “no” vote, saying the company’s proxy statement provided too little information about a $5 billion adjustment to free cash flow in determining whether the company met performance targets, which increased executive payouts. ISS also called out a decision to measure some performance criteria over one year, instead of three, for some equity awards.
A GE spokeswoman referred to the company’s securities filings, which said that the company had met with investors holding 52% of shares outstanding and that shareholders were overwhelmingly supportive of Mr. Culp.