Objective: Understand how the company plans on improving alignment between pay and performance of its compensation program.
Background: The company has been increasing base salary and equity grant award amounts for its CEO for the past three years since its IPO. However, the increase in pay is not substantiated by the company’s shareholder return.
In 2017, the CEO’s total pay increased 34.2% year-over-year when the company’s ROE, ROA and ROIC decreased and its TSR fell short of both S&P 500 and GICS peers on 1-, 3- and 5-year bases. The annual equity grant increased 45% compared to the prior year, and the concern is exacerbated by the fact that it is determined based on undisclosed goals.
Additionally, the one-time vested retention equity, which amounts to $1M each for the CEO and CFO and was granted for both executives, is entirely time-based for the purpose of retaining these two executives beyond July 2018.
On annual cash bonus, the CEO was paid 227% of his base salary even though 67% of the performance targets were missed.
For these reasons, we voted against executive compensation at the 2018 annual meeting.