Proxy released 3/13/2015
Of the proxies we’ve looked at so far this year, Pfizer is the company that has made the most positive changes to its compensation plan. It replaced restricted stock awards with additional performance share awards. Beginning in 2015, equity awards to executives will be “fully performance-based and will be delivered as 50% in Performance Share Awards (PSAs) and 50% in 5- and 7-year Total Shareholder Return Units (TSRUs).” This 5-7 year range more closely aligns with the longer term interests of shareholders.
In addition, it made adjustments to its peer groups. Of the companies seven removed, four, including Walt Disney and Time Warner, appeared in our 100 overpaid CEOs list.
The company offers thorough and thoughtful disclosure of its financial metrics, and the enhanced disclosure is one of the improvements it cites. One concern we note was that the targets for 2014 revenue and cash flow from operations were actually set below the 2013 results. Setting new goals lower than what was achieved in the past is generally problematic, but also generally invisible (or difficult to assess) to shareholders. The clear disclosure is to Pfizer’s credit, and we note that that CEO Ian Read’s annual incentive declined year over year. Total disclosed compensation was up from the prior year to $23,283,048, in part due to the over $5 million change in pension value.