As outrage grows over executive-pay
practices, biotechnology firm
Amgen Inc. is taking the unusual step of asking shareholders what they
think of its compensation plan.
In its March 26 proxy, Amgen, Thousand
Oaks, Calif., directed shareholders to a 10-question online survey.
Queries include whether the plan is based on performance and whether the
performance goals are clearly disclosed and understandable. Amgen says it
will post a summary of the responses on its Web site after its May 6
Amgen's survey, one of the first of its
kind, comes as executives and directors seek new ways to reach out to
restless shareholders. Drug maker
Schering-Plough Corp. had planned a similar survey before it agreed
last month to be acquired by
Merck & Co.; the company declines to comment on whether it will still
conduct the survey.
Prudential Financial Inc. this year created a link on its Web site so
investors could comment on its compensation plan.
Several other companies are likely to
conduct shareholder polls during the next few months, says
corporate-governance monitor Gary Lutin, who oversees a forum about
executive pay that includes investors, corporate executives and
Directors at other companies, such as
Home Depot Inc., meet with shareholders individually or in groups to
hear their concerns. Such meetings used to be rare.
Edward Durkin, a veteran activist investor
with the United Brotherhood of Carpenters and Joiners, says companies are
much more responsive than a few years ago. This year, he says, officials
of several firms called him to discuss pay practices before he could call
them; a few put CEOs and directors on the phone, he says.
These outreach efforts are taking on more
importance amid rising public anger over executive pay and new government
restrictions on compensation. Shareholders at roughly 400 companies that
accepted federal aid will conduct advisory votes this year on those
companies' compensation plans. Congress later this year may require such
"say-on-pay" votes at all companies. The results are not binding, but can
pressure boards to alter pay practices.
In the U.K., which has required such votes
since 2003, shareholders of
Royal Bank of Scotland Group PLC voted by a nine-to-one margin Friday
against the bank's 2008 compensation package, which included a [pound
]693,000 ($1 million) annual pension for former Chief Executive Sir Fred
Goodwin. The bank's chairman later said Sir Fred is considering reducing
the pension or donating some of it to charity.
Polling on Pay
Some companies are
asking shareholders to comment on their pay plans. Here are
edited versions of select questions from a poll by Amgen Inc.
Is the compensation
Is the plan clearly
linked to the company's business strategy?
Is the plan
customized to suit the company's size, industry and
Investor surveys can give boards detailed
information on what parts of pay plans investors like or don't like, and
let directors craft specific questions, says an executive at a company
that's considering a poll.
Amgen's survey questions were written by
pension-fund manager TIAA-CREF to help it evaluate pay plans of companies
in which it invests. Some of those companies asked TIAA-CREF for pointers
on how investors view their compensation. The firm, which manages around
$363 billion in assets, made its checklist public last year, says Hye-Won
Choi, head of corporate governance. "It's a way to get companies to pay
attention to the things shareholders care about most," Ms. Choi says.
Amgen hasn't received any holder complaints
about executive pay, says spokesman David Polk. Amgen CEO Kevin Sharer
received total direct compensation of $13.2 million in 2008, including
salary, bonus and the value of equity grants, according to an analysis by
Hay Group, a Philadelphia management consultancy.
Amgen invited shareholders to give online
feedback on its executive-pay practices last year, but only a handful
responded, says Mr. Polk. Responses ranged from thoughts on appropriate
levels of compensation to comments on incentive pay, he says.
This year, Amgen hopes the survey will
elicit more specific replies, although shareholders can still submit
free-form comments. The company urged its 30 biggest shareholders to take
part in the survey, Mr. Polk says.
Amgen provides its own answers to the
survey questions, including detailed explanations and references to its
proxy. In response to a question of whether Amgen's pay plan is "clearly
linked to the company's business strategy," the company says annual
cash-incentive awards for 2008 were based on revenue, earnings per share
and progress with its drug pipeline. Long-term equity grants are tied to
Amgen's share performance, the company says.
Phred Dvorak at
The Wall Street Journal, page B4