With thousands of companies holding AGMs during proxy season, it’s hard to know where to start. Glass Lewis’ Controversy Alert service can help, identifying the most crucial meetings globally and allowing investors to make better informed voting decisions with the latest information in hand.
In this post, we provide a roundup of the AGMs taking place this week that were previously highlighted by Controversy Alerts, and look deeper at upcoming Say on Pay votes taking place at CVS Health, Harley-Davidson, and Nicolet Bankshares. To get alerted ahead of time, get in touch and sign up for Glass Lewis’ Controversy Alert service.
Controversy Alerts May 15 — May 19, 2023
5/15 Huabao International Holdings Limited; Controversy Alert issued on 4/27
5/15 Nicolet Bankshares; issued on 4/25
5/16 Inovio Pharmaceuticals, Inc.; issued on 4/28
5/16 BNP Paribas SA; issued on 4/27
5/16 Stericycle, Inc.; issued on 4/26
5/16 Tesla, Inc.; issued on 5/1
5/17 Coca-Cola HBC AG; issued on 4/25
5/17 GFL Environmental Inc.; issued on 5/4
5/17 Hertz Global Holdings, Inc.; issued on 5/3
5/17 Southwest Airlines; issued on 5/1
5/18 Altria; issued on 5/1
5/18 CVS Health Corporation; issued on 5/1
5/18 Global Net Lease, Inc.; issued on 5/10
5/18 Harley-Davidson, Inc.; issued on 5/2
5/18 Home Depot, Inc.; issued on 5/4
5/18 The Necessity Retail REIT, Inc; issued on 5/10
5/18 Texas Pacific Land Corporation; issued on 5/10
5/18 World Wrestling Entertainment, Inc.; issued on 5/2
Say on Pay Roundup
Executive pay is often a lightning rod during proxy season, generating headlines both for the sheer amounts involved, and the ways that payouts are tied to (or insulated from) other areas of the business. This week’s roundup includes two companies that saw significant voting opposition at their 2022 meeting primarily due to concerns with their pay structure, and one that will have to justify its approach to incorporating the impact of a massive opioid-related settlement that the current executive team is largely not responsible for.
Harley-Davidson’s 2022 AGM marked the fifth consecutive Say on Pay vote with notable opposition — and the first time it failed to receive majority support. A separate proposal seeking approval of a supplementary “Aspirational Incentive Stock Plan” also received nearly 30% opposition. There are a number of issues that may have prompted shareholder concern: excessive quantum, the absence of performance conditions for the CEOs standard long-term share grants, a short vesting period for those “long-term” awards, and massive one-off grants outside of the standard plan cycle that are only subject to rolling share price hurdles. After engaging with investors representing more than half of the company’s share base, the company found that the CEO’s arrangements had driven dissent. In response, his standard long-term share grant will vest in three tranches over three years, rather than all after one year; however, the CEO’s awards remain non-performance-based, and the company went ahead with a $32 million off-cycle grant.
Nicolet Bankshares has similarly eschewed executive compensation best practices, and had a similar result in last year’s Say on Pay voting. The company’s short- and long-term awards appear largely discretionary, and the compensation structure lacks any deferred component. Rather than address that latter issue by introducing a more robust incentive structure, in 2021 the company elected to make discretionary $2.25 million cash contributions to a non-qualified deferred compensation plan for the CEO and executive chair. The amounts made up the majority of their total pay for the year, and represented roughly 6x the contributions they had received the prior year. The decision prompted over 47% of voting shareholders to oppose last year’s Say on Pay, which just barely passed. In response, the company met with its six largest investors, representing 19% of issued share capital, and determined to decrease FY22 NQDC awards, add a two-year vesting period the CEO’s awards (but not the executive chair’s), and to introduce stock ownership guidelines requiring the CEO to hold shares worth 6x salary (3x for other executives).
Shareholders at both companies will have to decide if the respective boards’ responses were enough.
Meanwhile, unlike Harley and Nicolet, CVS Health has a fairly conventional pay structure, and received relatively strong support for its 2022 Say on Pay. However, this year’s vote may be a bit closer due to pay decisions made during the year. In particular, shareholders may have questions about the impact of the company’s $5 billion opioid litigation settlement on compensation. In response to the settlement, CVS determined to take two compensation-related actions: a one-time 33% reduction to CEO Karen Lynch’s STI payout, and a one-time action to reduce non-employee board member compensation in 2023 by 10%. The company considered other actions (such as reducing the STI payouts for other members of the executive leadership team, impacting 2020 PSUs or recoupment) and multiple factors (including shareholder feedback, executive tenure, and strong recent performance), providing relatively thorough disclosure around its process and rationale behind these decisions. Nonetheless, given the precedent set by other companies’ post-opioid settlement Say on Pays (Johnson & Johnson saw opposition spike to over 40% in 2021), this may be one to watch.
Looking for More?
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