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General Electric, AT&T investors are rejecting the CEO’s payment plans



Shareholders in General Electric Co.

GIVE -2.45%

and AT&T Inc.

T 1.65%

rejected compensation plans for CEOs of non-binding companies, the latest companies with blue chips, which will be criticized by investors for how they paid leaders during the pandemic.

Nearly 58% of GE GE -2.45%

the shares were voted against board compensation practices, according to the initial assessment announced at GE’s annual meeting on Tuesday. Less than half of the shares filed at the AT&T meeting last week supported the telecommunications and media giant’s compensation plans, the company said Friday. None of the companies has yet disclosed full amounts.

The two widely held shares add to the growing list of major US companies that have failed to gain shareholder support for their executive compensation plans this year. Such advisory votes are non-binding and seldom fail to gain overwhelming shareholder support; but some institutional investors have used them this year to express dissatisfaction with Starbucks as well Corp.

and the Walgreens Boots Alliance Inc.,

among others.

GE and AT&T executives received special stock awards in 2020 that made them the highest paid business leaders last year, a difficult time when the pandemic disrupted business, tested managers and cost millions of Americans their work. The average CEO received $ 1

3.7 million in compensation in 2020, according to an analysis by the Wall Street Journal in April.

Asset Manager Allianz Global Investors said its board of directors had decided to vote against AT & T’s executive director’s compensation plan. “This justification takes into account a number of one-off compensation committee decisions that raise concerns about the relationship between results,” an Allianz spokeswoman said, adding that long-term incentive payments “allowing payments for results that are lower than peers” contributed to the decision.

Shareholders have rejected compensation issues in eight companies in the Russell 3000 index, or about 4.2 percent of the holders so far this year, compensation firm Semler Brossy said in a report released last week. This is twice the percentage at the same time last year. Among the 191 companies holding votes so far, average support for compensation votes was 89% in the Russell 3000 and 87% for the S&P 500, both well below the average at the time last year.

Some votes were rejected. At Park Hotels & Resorts Inc.,

18% of investors backed his implementation compensation plan this year, while 30% voted in favor of Marathon Petroleum’s payment plans Corp.

, the companies disclosed in the latest regulatory declarations.

The Covid-19 pandemic has provided investors with more information than usual about the quality of a company’s governance, at least during a crisis, said Jie Cai, a professor of finance at Drexel University who studies corporate governance and compensation. “Investors get more signals about the skills of their managers – they may reward the good and punish the bad,” he said.

Although the votes are not binding, companies often react to poor performance by adjusting pay practices in the coming years, Prof. Tsai said. “Publicity is bad,” he said. “There is definitely pressure on companies, especially on board.”

Larry Culp, chairman and CEO of GE, received compensation valued by the Boston-based company at $ 73.2 million, according to securities claims. In the summer, GE’s board reviewed the CEO’s contract, extending it until 2024, and awarded Mr. Culp a special share grant, valued at more than $ 100 million at the end of 2020. Mr. Culp received a salary of $ 653,409 after voluntarily waiving his remaining salary in April and also waiving his cash bonus for the year.

The GE vote came after a campaign opposing the compensatory vote with proxy advisors Glass Lewis & Co. and institutional equity services recommending investors to decline support.

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Neuberger Berman, investment manager, warned GE in advance that he would maintain his support due to the extension of Mr. Culp’s contract, arguing that Mr. Culp’s salary should have been reduced when the performance targets were reduced. against the background of the pandemic. “When efficiency targets are reduced, potential payout levels must also be reduced,” said Caitlin Maxherry, director of the investment management firm.

The money manager said the vote did not reflect a lack of confidence in Mr Culp. “We see Larry’s leadership as a critical component of GE’s ability to make a successful turnaround,” Ms. Maxherry said. “Extending his time with the company was the right decision.”

At Tuesday’s meeting, GE chief executive Tom Horton answered questions about the change in compensation and defended the board’s decision. At the start of the pandemic, it became clear that GE’s reversal would take longer than originally planned, Mr Horton said, and the council moved to provide Mr Culp’s leadership by 2024.

At the time, the board saw the move as an extension, he said, but also discussed how the new grant could be seen as a reassessment of its results-based objectives.

“The board believes that it is in GE’s best interests and our responsibility as a board to provide Larry so that he can continue to manage GE’s transformation,” Mr Horton said. “If the maximum number of shares is won in 2024, it will mean that all shareholders will benefit.”

A spokesman for the GE board said he would take shareholders’ votes into account when assessing his compensation program.

AT&T veteran John Stankey at a WarnerMedia event in late 2019.


Photo:

Presley Ann / Getty images

At AT&T, CEO John Stankey and WarnerMedia chief Jason Killar raised $ 21 million and $ 52.2 million in compensation in their first year, respectively. Much of Mr Killar’s package reflected rewards for shares that would be paid for several years.

Randall Stevenson, who served as AT&T’s chief executive until the end of June, when Mr. Stankey took office, and as chairman until January, had $ 29.2 million in compensation.

AT&T said its compensation program aims to attract and retain executive talent, while taking into account shareholder feedback when drawing up payroll plans. “As we continue to engage with our owners on this important issue, the Council will carefully consider today’s deliberative vote to ensure that our approach to compensation continues to reflect these principles,” AT&T President William Kennard said in a statement.

The Dallas-based company said about 49% of shareholders voted to approve its executive compensation, but did not disclose other details about the vote.

Both GE and AT&T performed weaker than the general market last year. GE’s total shareholder return was negative 2.7% in 2020, while AT&T was negative 21%. The S&P 500 had a total return of 18.4% in 2020.

Write to Thomas Grita at thomas.gryta@wsj.com, Theo Francis at theo.francis@wsj.com and Drew Fitz Gerald at andrew.fitzgerald@wsj.com

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