By Levi Sumagaysay
Shareholders in some of the world’s biggest tech companies will vote next week on top executives’ compensation, as influential advisory services urge them to fight the massive paydays.
“Say on pay” votes are scheduled for Wednesday at Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +3.15% , Facebook parent company Meta Platforms Inc. and Twitter Inc. /zigman2/quotes/203180645/composite TWTR +2.25% , as part of those companies’ annual shareholder meetings. The votes are advisory and nonbinding, but they give investors a chance to make their feelings known about the pay of executives at some of the world’s most famous tech companies, which they have already done this proxy season.
About 66% of Intel Corp. /zigman2/quotes/203649727/composite INTC -2.86% shareholders voted against the chip maker’s executive pay structure last week, including compensation of $178 million for Chief Executive Pat Gelsinger, according to a filing with the Securities and Exchange Commission this week. Investors in other tech companies seeking to speak out against hefty executive compensation have backing from shareholder advisory firms Institutional Shareholder Services, or ISS, and Glass Lewis, which are both urging Amazon investors to vote against the company’s executive-compensation program, saying executive pay is not aligned with performance.
New Amazon Chief Executive Andy Jassy, who was promoted last year after company founder Jeff Bezos stepped aside as CEO, was awarded an equity grant worth $214 million. Jassy’s stock grant vests over 10 years, starting in 2023, but ISS noted in its proxy paper that the company’s compensation program is entirely time-based, does not have preset performance criteria, and that it is unclear whether Jassy will continue to receive additional equity awards during the next decade.
“Shareholders should be concerned with this year’s disconnect between pay and performance driven by one-off awards in 2021, including a $214 million mega-grant to the new CEO,” Glass Lewis wrote in its proxy research report.
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The advisory firms also expressed their concern over equity awards to two other Amazon executives, CEO of Worldwide Consumer David Clark (nearly $57 million) and CEO of Amazon Web Services Adam Selipsky (nearly $82 million).
In its proxy, Amazon said it has explained to investors its philosophy of tying executive pay to long-term performance. The company said “a small minority of investors” disagree with its approach.
ISS is also recommending that investors vote against the executive compensation program of Facebook’s parent company, saying that Meta appears to determine compensation at the discretion of the board committee; that its incentive programs lack disclosed objective metrics and quantified goals; and that other named executive officers “receive very large equity awards that lack performance vesting criteria.”
ISS further states that the security costs for the company’s top two executives, CEO Mark Zuckerberg ($25.3 million in 2020; $26.8 million in 2021) and Chief Operating Officer Sheryl Sandberg ($8.5 million in 2020; $11.3 million in 2021), are “exceedingly large” and continue to rise. Zuckerberg had $1 in salary in 2021 and the only other listed compensation for him was security costs, which included a $10 million pretax allowance for personal security that he can use as he sees fit as well as $15.2 million in security costs to the company. Sandberg’s 2021 compensation was $35.3 million, which included a nearly $1 million salary, $850,000 bonus and $22.2 million in stock awards.
In its proxy, Meta said its practices are centered on pay for performance. The company also said the security costs for its top executives are necessary because of their high profiles, and that travel costs for both Zuckerberg and Sandberg were higher in 2021 because of their increased personal travel and a rise in security-personnel costs.
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ISS and Glass Lewis also are recommending that investors vote against the executive compensation program at Twitter — although the company does have a pending deal to be taken private by Tesla Inc. /zigman2/quotes/203558040/composite TSLA +1.24% CEO Elon Musk that could render moot any shareholder votes or actions at the meeting.
The advisory firms both expressed concern about a one-time $12.5 million grant awarded to new Twitter CEO Parag Agrawal, who took the helm in November, replacing Jack Dorsey. ISS noted that the equity grant is time-based and not performance-based.
In addition, both firms mentioned that Agrawal was awarded another grant for $12.5 million that appears to be incentive-based, along with a $1 million annual salary. Glass Lewis said in its proxy paper that though it recognized that the disconnect between pay and performance can be affected by a CEO transition, “given the value of the awards granted and their impact on total granted compensation for 2021, we remain concerned by the company’s pay practices.”
Equilar estimated that Agrawal would receive $42 million if he is terminated within a year of a change of control of Twitter.
In its proxy, Twitter touted executive-compensation programs “designed to tie award outcomes to the achievement of financial and performance outcomes, as well as returns to our stockholders.”
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Investors are voting against pay packages beyond the tech sector as well. Only 31% of JPMorgan Chase & Co.’s /zigman2/quotes/205971034/composite JPM +1.28% investors voted for that company’s executive-compensation program this week , according to a transcript of its annual meeting. CEO Jamie Dimon’s total compensation for 2021 was $84.4 million, which included a $52.6 million options award that was framed as a “retention bonus.”
The Wall Street Journal reported this week that, according to Equilar, so far this proxy season 23 companies in the S&P 500 have seen less than 70% support for their executive-compensation programs.
Dieter Waizenegger is executive director of SOC Investment Group, which among other things aims to hold corporations accountable for excessive pay for executives. He said SOC advocates a move away from performance-based incentives, “which can be too easily gamed, and instead return to a full-value time-vesting awards model.” He also said compensation-committee members on corporate boards should be held accountable “when it is clear the board is supporting unjustified executive pay packages.”