Pay Reduction and Negative Discretion

I’ve written about two sets of companies that have made positive changes to their compensation practices: those where CEO compensation went down by more than 20% and those that made solid changes in the face of low shareholder votes. I’ll be blogging next week on some less than solid changes and highlighting more recalcitrant companies. When I did some searches for the terms “negative discretion” many proxy statements noted compensation plans that included language allowing for negative discretion. But I found few examples of companies that utilized that ability. Here are some companies (in addition to a few of those in prior blogs) who made true reductions:

Manulife/John Hancock annual report: “After shareholder support for our approach to executive compensation declined from 91 percent in 2015 to 77 percent in 2016, I pledged at the annual meeting to review our program and take action to meet shareholder expectations…Subsequent months of meetings with management …resulted in seven significant changes…I would like to thank all of those that participated, especially our CEO who voluntarily accepted a reduction in his compensation…”

Capital Senior Living: Although the annual bonus based on prescribed metrics was earned at near target for the CEO and CFO, “the Committee decreased the actual annual incentive payout for the CEO and CFO by 30% to acknowledge the broader industry downturn and its impact on our financial performance and our total stockholder return. In addition, to further align executive compensation levels with shareholder feedback and the market as reflected by our peer group the Compensation Committee adjusted 2017 LTI target pay levels downward.”

Tetra Technologies – As part of the company’s cost reduction efforts, “In February 2016 the Committee approved a 10% reduction in the base salaries of all of our NEOs employed by TETRA, and in May 2016 the Committee approved an additional reduction in the amount of 10% of the previously reduced base salaries of our NEOs employed by TETRA.”

I would welcome other examples and will happily add them to this blog.