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General Electric shareholders on Tuesday voted against $ 230 million package from chief executive Larry Culp, which this year extended a wave of investor activism over big bonuses to U.S. companies.
According to preliminary results, 57.7% of shareholders rejected the industrial conglomerate’s payment packages for its executives.
Investors opposed the fact that last year the pandemic rewrote Culp’s salary plan so that it was easier for him to earn bonuses. GE’s board of directors expanded Culp’s contract and reduced the price of the shares with which it would gain additional shares and nearly doubled the number of shares it would receive.
As the stock market roared again late last year, Culp stalled $ 47 million bonus shares and the payment could increase to a maximum of $ 230 million by at least 2024 if it stays with the company.
Last year, awards for GE executives garnered 73% of shareholder support. Following Tuesday’s vote, which was advisory and non-binding, GE said it was “disappointed” by the results and would continue to work with shareholders on the issue of compensation.
In addition to sinking into the anxiety of GE investors, Culp said Tuesday that the company would not increase its dividend in the near future. “We need to continue to make structural improvements to build a stronger GE before we can increase the dividend,” he said.
Average shareholder support for U.S. executive compensation packages has dropped to its lowest level since at least 2016, according to Equilar, a payroll data company. Five S&P 500 companies have now turned down their executive compensation packages, including IBM and Starbucks, compared to 10 throughout 2020, according to ISS Corporate Solutions.
Investors typically pay for rubber stamps, most plans receive more than 90% support.
“I don’t think we’ve ever seen a situation where big, prominent companies like this fail,” said Matteo Tonello, managing director of the Conference Board, an international think tank. Rejections of pay packages usually occur to medium or small businesses, he said, adding that for such large companies the failure of bonus votes “is unprecedented.”
More contested votes are expected this month, as shareholders agree with Amazon, ExxonMobil and others.
Among Russell 3000 companies, the rate of failure of payroll votes is double that at this time in 2020, according to Semler Brossy, a payroll consultant. Average support for pay “is well below last year’s average,” the firm said in a report on April 29.
Payment plans rewritten during the pandemic to facilitate bonus earnings are some of the main reasons companies are rejecting payroll votes this year, Courtney Yu told Equilar.
“We will definitely see a continued trend of more companies getting less than 70% of the vote this year,” he said.
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