SHAREHOLDERS GETTING FED UP WITH BOARDS THAT GRANT EXORBITANT SALARIES

Circus was one word used to describe Mattel Inc.'s shareholder meeting in Manhattan Beach this month. And a circus it was. Shareholders shouted from their seats, and lined up at the microphone to spew their outrage at the $40 million-plus severance package given to former CEO Jill Barad, who is widely blamed for the company's huge losses and sagging stock price.

If current trends continue, expect more "circuses" coming to town soon.

"Shareholder rights group have become more prevalent, as well as more intelligent, because there is more information out there about what executives are getting paid," said Josh Lurie, chief executive of Joint Information Inc., a New York-based compensation research firm. "As we see an increasing number of these outrageous pay packages, people are starting to wonder who approves these kinds of deals."

Company directors, especially those serving on boards' compensation committees, are the ones who approve the mega-pay deals. And an increasing number of shareholders are expressing displeasure, even outrage, at what they consider overly chummy relations between board members and company executives.

Among the most influential shareholders showing impatience with directors who sign off on huge pay deals for under-performing execs are the public pension funds, such as the California Public Employees Retirement System. With billions of dollars invested for the long haul, pension funds are getting more involved than ever in corporate governance.

At Mattel's shareholder meeting, CalPERS withheld its vote for the directors on the compensation committee who were responsible for Barad's severance package. (When board members come up for re-election, shareholders have three choices: they can vote yes, no, or withhold their vote. The latter choice is seen as a less-negative way for shareholders to show their lack of support for a director.)

Likewise, CalPERS withheld its vote for board members on the compensation committee of Occidental Petroleum Corp. In a release, CalPERS stated that the directors in question, including local billionaire Ronald Burkle, had awarded excessively generous compensation to executives of under-performing Oxy.

Indeed, Occidental's top executives, led by Chairman and CEO Ray Irani, are very well represented among the highest-paid public company executives in L.A. Irani made $14.1 million last year, including $11.3 million in stock options. Meanwhile, Oxy's share price, at a little over $22 as of late last week, is hovering at about the same place it was a year ago, despite a dramatic run-up in crude oil prices.

Prev

For reprint and licensing requests for this article, CLICK HERE.