By Thomas Gryta and Drew FitzGerald
Shareholders at General Electric Co. and AT&T Inc. rejected
the companies' executive compensation plans in nonbinding votes,
the latest blue-chip companies to be rebuked by investors over how
they paid leaders during the pandemic.
Nearly 58% of GE shares were voted against the board's
compensation practices, according to an initial tally announced at
the GE annual meeting Tuesday. Less than half of shares cast at
AT&T's meeting last week supported the telecom and media
giant's compensation plans, the company said Friday. Neither
company has disclosed full tallies yet.
The two widely held stocks add to a growing list of big U.S.
companies that have failed to garner shareholder support for their
executive compensation plans this year. Such advisory votes are
nonbinding and rarely fail to win overwhelming shareholder support;
but some institutional investors have used them this year to also
voice their displeasure with Starbucks Corp. and Walgreens Boots
Alliance Inc., among others.
The executives at GE and AT&T received special stock awards
in 2020 that made them among the highest-paid business leaders last
year, a difficult period when the pandemic disrupted business,
tested managers and cost millions of Americans their jobs. The
median CEO received compensation of $13.7 million in 2020,
according to a Wall Street Journal analysis in April.
Asset manager Allianz Global Investors said its stewardship
committee decided to vote down AT&T's executive compensation
plan. "This rationale takes into account multiple one-off decisions
by the compensation committee raising concerns around performance
linkage," an Allianz spokeswoman said, adding that long-term
incentive payments "enabling payouts for performance that is
inferior to peers" also contributed to the decision.
Shareholders have voted down compensation questions at eight
companies in the Russell 3000 index, or about 4.2% of those holding
votes so far this year, compensation consulting firm Semler Brossy
said in a report issued last week. That is twice the rate at the
same time last year. Among the 191 companies holding votes thus
far, the average support for compensation votes is 89% in the
Russell 3000 and 87% for the S&P 500, both well below the
average result at this time last year.
The Covid-19 pandemic has given investors more information than
usual about a company's management quality, at least during a
crisis, said Jie Cai, a Drexel University finance professor who
studies corporate governance and compensation. "Investors are
getting more signals about what their managers' skills are -- they
are maybe rewarding the good ones and punishing the bad ones," he
said.
Although the votes are nonbinding, companies often respond to a
poor showing by adjusting pay practices in future years, Prof. Cai
said. "The publicity is bad," he said. "There's definitely pressure
on the companies, on the board specifically."
Larry Culp, GE's chairman and chief executive, received
compensation valued by the Boston-based company at $73.2 million,
according to securities filings. Over the summer, the GE board
revised the CEO contract, extending it until 2024 and awarding Mr.
Culp a special stock grant that was valued at more than $100
million at the end of 2020. Mr. Culp voluntarily gave up his salary
of $653,409 after Covid-19 struck and also declined his cash bonus
for the year.
The GE vote came after a campaign opposing the compensation vote
with proxy advisers Glass Lewis & Co. and Institutional
Shareholder Services recommending investors withhold their
support.
Neuberger Berman, an investment manager, warned GE in advance
that it would withhold its support because of Mr. Culp's contract
extension, arguing Mr. Culp's pay should have been reduced when
performance targets were eased amid the pandemic. "When performance
targets are reduced, potential payout levels should also be
lowered," said Caitlin McSherry, the firm's director of investment
stewardship.
The money manager said the vote didn't reflect a lack of
confidence in Mr. Culp. "We view Larry's leadership as a critical
component of GE's ability to lead a successful turnaround," Ms.
McSherry said. "Extending his time with the company was the right
decision."
At Tuesday's meeting, lead GE director Tom Horton answered
questions about the compensation change and defended the board's
decision. At the beginning of the pandemic, it became evident that
GE's turnaround would take longer than initially planned, Mr.
Horton said, and the board moved to secure Mr. Culp's leadership
through 2024.
At the time, the board viewed the move as an extension, he said,
but also discussed how the new stock grant might be viewed as a
repricing of his performance-based goals.
"The board believed it was in GE's best interest and our
responsibility as the board to secure Larry so he can continue to
drive GE's transformation," Mr. Horton said. "If the maximum number
of shares are earned in 2024, it will mean all shareholders will
have benefited."
A spokeswoman for the GE board said it would take the
shareholder vote into consideration as it evaluates its
compensation program.
At AT&T, CEO John Stankey and WarnerMedia division chief
Jason Kilar collected compensation valued at $21 million and $52.2
million, respectively, during their first year on the job. Much of
Mr. Kilar's package reflected stock awards that would pay out over
several years.
Randall Stephenson, who served as AT&T chief executive until
the end of June, when Mr. Stankey took over, and as chairman until
January, had compensation valued at $29.2 million.
AT&T said its compensation program aims to attract and keep
executive talent, while also taking into consideration shareholder
feedback in the drafting of pay plans. "As we further engage with
our owners on this important topic, the Board will carefully
consider today's advisory vote to ensure that our approach to
compensation continues to reflect these principles," AT&T
Chairman William Kennard said in a statement.
The Dallas-based company said about 49% of shareholders voted to
approve its executive compensation but didn't disclose other
details about the vote.
Both GE and AT&T underperformed the broad market last year.
GE's total shareholder return was negative 2.7% in 2020, while
AT&T's was negative 21%. The S&P 500 index had a total
return of 18.4% in 2020.
Write to Thomas Gryta at thomas.gryta@wsj.com and Drew
FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
May 04, 2021 18:00 ET (22:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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