As You Sow-makes case that votes can in fact limit high pay
2023.02.16 09:16
As You Sow-makes case that votes can in fact limit high pay
By Tiffany Smith
Budrigannews.com – Even though investors have been voting against management with more of their advisory “Say on Pay” votes in recent years, chief executive compensation has increased dramatically, raising questions about the validity of the ballots.
However, a new study from the activist shareholder group As You Sow, which will be released on Thursday, argues that votes can in fact limit high pay, at least when it is not matched by solid returns for shareholders.
In light of ongoing inflation and layoffs, the conclusion serves as a warning to corporate directors who will face investor judgments during the springtime annual shareholder meeting season.
Rosanna Landis Weaver, a co-author of the annual study of “Overpaid CEOs,” which is widely read by pay experts, stated that poor pay designs “eventually come home to roost.” This is especially true given the fact that some businesses give their leaders enormous share packages.
This year, Warner Bros. Discovery (NASDAQ:) tops As You Sow’s list. Some highly compensated US CEOs feel the heat. According to the most recent disclosure from the media company, Inc. CEO David Zaslav received $246.6 million for 2021, largely as a result of options granted when the company was known as Discovery Inc. Discovery’s total shareholder return for 2021 was minus 22%, whereas the S&P 500 gained 29%.
According to Weaver, Discovery Inc. had multiple share classes that increased the power of insiders and only voted on Zaslav’s pay once every three years, effectively shielding him from shareholder pressure.
In contrast, she cited Aptiv (NYSE:) as an example of a company where critical votes were followed by pay cuts. Plc, where only 57% of votes cast “for” or “against” executive pay supported Kevin Clark’s 2020 salary of $31.3 million. The following year, the company paid Clark $14.7 million and stated in a securities filing that it took shareholder feedback into account and received support from 92% of votes cast.
Warner Bros. Discovery, which was established last year when Discovery Inc. purchased AT&T (NYSE:) ‘s media assets has not specified a pay vote frequency.
According to a spokesperson, Zaslav would need to more than double the current share price of the company in order to begin receiving the one-time options grant that would drive his 2021 pay and keep him in his position as leader of the combined company.
Nathaniel Brown, the spokesperson, stated, “The vast majority of the headline number is theoretical.”
Reps for Aptiv did not respond to messages.
As You Sow used factors like shareholder returns, critical shareholder pay votes, and the ratio of CEO pay to worker pay to rank CEOs as “overpaid.”
It noted that the average percentage of votes cast “against” executive pay at S&P 500 companies increased to 12.6% in 2018, up from 11.7 percent in 2021 and 10.4% in 2020.
According to HIP Investor, a contributor to As You Sow’s report, which is now in its ninth year, the average S&P 500 CEO pay in 2021 was $18.8 million, compared to $15.6 million in 2020 and $15 million in 2019.
R. Paul Herman, CEO of HIP Investor, stated that the reports show that CEOs who are listed as overpaid more frequently also deliver lower returns to shareholders.
Returns on repeat appearances are lower. “This is not a philosophical debate. “They have been paid more despite making less money for investors,” Herman stated.
