IBM pay plan narrowly passes as 46% investors oppose move

Bloomberg

IBM’s compensation plan for top executives drew record shareholder opposition after the board boosted Chief Executive Officer Ginni Rometty’s pay package over 60 percent last year.
About 46 percent of the votes cast at the April 25 annual meeting in Tampa, Florida, went against the board’s pay plan for top bosses, according to a regulatory filing. That’s IBM’s lowest result since votes were first mandated for public companies in 2011. While it isn’t binding, 30 percent opposition is generally considered the threshold for a losing vote and a result that should prompt directors to address shareholder concerns.
Investors including California State Teachers’ Retirement System and Florida’s State Board of Administration rejected the proposal that gave Rometty a $32.7 million pay package, her biggest since taking over the company in 2012. It came with a one-time grant of stock options that International Business Machines Corp. valued at $12.1 million. That might understate their value by perhaps 50 percent or more because of the way IBM values options, Bloomberg has reported.
The board “will review the results of this vote, as is its customary practice,” IBM said in an emailed statement. “The company will continue to align its compensation practices with the best interests of our shareholders, and balance those practices with the flexibility needed to attract and retain great leaders for this unique moment in the technology industry.”
The strike prices for Rometty’s premium options were “below the average three or five-year stock price levels, providing little corresponding benefit to long-term shareholders,” Jacob Williams, corporate governance manager at Florida’s State Board of Administration, said in an email. The premium stock options vest in 2019 if certain stock-price targets are met.
“Ongoing concerns are exacerbated by the increased magnitude of CEO pay,” proxy adviser Institutional Shareholder Services Inc. wrote in a report dated March 28, recommending clients vote against the board’s pay proposal. “The lack of disclosed performance targets under both the annual and long-term incentive programs is unusual and inhibits shareholders’ ability to assess the programs’ rigor.”