SPPI Spectrum Pharmaceuticals Inc

By Joann S. Lublin 

With annual meeting season under way, investors across the U.S. can express their anger about high pay for top corporate officers.

So-called say-on-pay votes don't give shareholders the power to cut executive rewards. But boards fear a thumbs' down on the nonbinding referendum, required since 2011, because the rebuke suggests deeper investor discontent.

Last week, for instance, BP PLC saw a majority of votes cast against the oil company's compensation decisions for 2015.

The only thing worse than losing a say-on-pay vote is losing two votes. Or three.

Several businesses with multiple defeats, such as TCF Financial Corp., Oracle Corp. and Spectrum Pharmaceuticals Inc., likely will face shareholder outcries over related pay or corporate governance issues this year.

In all, 39 companies in the Russell 3000 index have lost say-on-pay votes at least twice between 2011 and April 15, according to Willis Towers Watson, a consulting firm. Nine lost the vote three or more times, its analysis found.

After losing a pay vote, many boards work hard to overcome investor dissatisfaction by conferring with major stockholders or altering some pay practices. Those efforts don't always succeed, however.

At TCF, the bank holding company's investors may reject executive-pay packages for the third straight year at its annual meeting next week.

Veteran director Vance Opperman, who chairs the board's compensation committee, has spent nearly two years making extensive outreach to big shareholders and overhauling TCF's pay practices. Yet he is only "cautiously optimistic" the vote will pass this year.

"Once a company gets in the penalty box over say-on-pay votes, it's hard to get out," Mr. Opperman said.

Companies with repeated failures often are run by a chief executive who holds a significant stake. Critics say such firms typically exhibit a disconnect between the level of executive pay and corporate performance.

"They are tone-deaf to investors' concerns," said Meredith Miller, chief governance officer of UAW Retiree Medical Benefits Trust, which has $61 billion in assets.

Among big U.S. businesses, the least-loved executive pay packages belong to general contractor Tutor Perini Corp. Support for the pay of CEO Ronald Tutor and other officers hit a low of 37.6% in 2015, the company's fifth annual defeat. No other Russell 3000 firm has lost its say-on-pay vote for five years.

Investors disliked the fact fellow directors promised Mr. Tutor a $5 million bonus for succession planning, one of a CEO's regular job duties. The 75-year-old executive took command of the company in 2000, owns 18% of its shares and got paid $12.1 million last year.

A Tutor Perini spokesman declined to comment on the CEO's pay, but its 2016 proxy states that "Mr. Tutor's value to the Company is significant."

At TCF, Mr. Opperman met face-to-face with nine of its 10 largest investors after say on pay failed for the first time in 2014. Some expressed discontent about a nearly $8 million equity grant for longtime CEO William A. Cooper that year.

Though tied to performance, the award of 500,000 restricted shares "was outsized," Mr. Opperman admitted. "We had not done a good job at all" in explaining that the award sought to encourage Mr. Cooper to remain CEO until early 2016 and chairman until early 2018, he said. "You're not going to find a lot of Bill Coopers."

Following investors' 2014 vote, TCF made numerous changes, such as a long-term equity plan tied to shareholder returns.

Yet say on pay garnered even lower support last year. Shareholders approved a resolution favoring proxy access, which gives investors greater clout by allowing them to put their own board candidates on official ballots. Once more, Mr. Opperman met with nine major investors and the board further tweaked pay practices.

TCF directors embraced proxy access last October. And in the 2016 proxy, they finally reported that Mr. Cooper's 2014 grant was a four-year award.

Other boards appear less open to shareholders' compensation concerns. Oracle investors have voted against sizable pay packages for top executives of the business software developer four times. Co-CEOs Safra Catz and Mark Hurd made about $53.2 million each during fiscal 2015.

Shortly before Oracle's annual meeting last November, shareholders warned two directors that the pay vote would fail a fourth time. Directors replied that Ms. Catz and Mr. Hurd were paid this well because "the co-CEOs are being recruited all the time," according to someone familiar with the situation.

Shareholders passed a proxy access resolution, partly because proponents cited Oracle's pay-vote flops. Nathan Cummings Foundation, the lead sponsor, will revive the proxy access proposal this year unless Cummings reaches agreement with Oracle before its May 25 deadline for submitting resolutions, said Laura Campos, director of shareholder activities. An Oracle spokeswoman declined to comment.

Directors of certain companies with multiple say-on-pay defeats have encountered re-election challenges, though few -- if any -- have lost their seats.

In 2015, Institutional Shareholder Services urged Spectrum investors to oppose all seven directors after two years of rejected pay votes. The proxy adviser previously questioned the biotech company for not tying equity awards to performance.

Three compensation committee members received less than 50% support -- but kept their seats due to Spectrum's board-election rules. Raymond Cohen, the narrowly re-elected chairman of the pay panel, said he considers his lightning-rod role "a thankless job."

Spectrum directors are crafting a new compensation program, Mr. Cohen said. "But it takes a little bit of time [because] you want to be thoughtful."

Write to Joann S. Lublin at joann.lublin@wsj.com

(END) Dow Jones Newswires

April 19, 2016 19:22 ET (23:22 GMT)

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