At its annual meeting today, technology giant Hewlett-Packard failed to obtain majority support during an advisory vote on its pay practices, according to Bloomberg News. H-P is the fourth U.S. company this year to suffer this rebuke from investors.
The opposition from H-P shareholders may reflect concern over the lucrative pay package for new CEO Leo Apotheker and the independence of the five new board members that he helped recruit. In the past, the company provided generous severance payouts after the board ousted former chief executives Mark Hurd and Carly Fiorina.
Apotheker's pay arrangements include substantial up-front signing awards of cash and stock, and severance provisions that would result in sizeable payouts--including automatic vesting of all his time-based equity--upon his termination without cause. Many aspects of the company's incentive programs are subject to board discretion as well, and depend on the board exercising its authority objectively--e.g., the granting of discretionary bonuses and approval of higher-than-median pay benchmarking. The company has paid substantial discretionary awards and does not disclose goals for the key metrics that drive payouts under its annual and long-term plans, even retrospectively. Without complete disclosure, shareholders cannot ascertain the rigor of the goals relative to payouts.
Earlier this week, Shuffle Master, a Las Vegas-based maker of casino equipment, reported that investors gave just 44.1 percent support to management during a non-binding vote on compensation at the March 17 annual meeting. Shuffle Master has a market cap of about $550 million and is in the Russell 3000 index.
The vote at Shuffle Master appears to reflect investor concerns over the severance terms in an employment agreement that was reached with interim CEO David Lopez in February. That agreement included a “modified single-trigger” provision that would have allowed Lopez to receive severance if he decided to leave the company within 90 days of a change in control. Many investors object to single-trigger provisions that don’t require executives to actually lose their jobs to receive a payout.
On March 16, Shuffle Master announced that it had hired a new CEO, Michael Gavin Isaacs, who will start work on April 1. Lopez is to remain as the chief operating officer and continue serving on the board, the company said.
In addition to H-P and Shuffle Master, two other firms--Jacobs Engineering Group and Beazer Homes USA--have failed to win majority approval for their pay practices this year. With a few exceptions, most issuers have earned wide support during this season’s “say on pay” votes. The support for management has averaged 90.7 percent, according to ISS Voting Analytics data as of March 22, which includes results from 117 companies.