Valeant (VRX) ($VRX) is one of the stocks in my portfolio. Their annual meeting is coming up on 5/30/2012. Voting ends 5/29 on Moxy Vote’s proxy voting platform, which had 3 recommendations “from good causes” when I checked and voted on 5/23 but 2 were consolidations of the one. ProxyDemocracy.org had 0 funds voting. I voted with management 33% of the time.
I make it a practice to vote against pay packages where NEOs were paid above median in the previous year. Yes, I know, this is pretty crude analysis. I’ll make exceptions where something obviously warrants different treatment. However, I’m concerned that NEOs are taking a greater and greater portion of wealth generated by companies.
According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay, Oxford Review of Economic Policy, Vol. 21, Issue 2, pp. 283-303, 2005), the aggregate compensation paid by public companies to their top-five executives during the period 1993-2003 totaled about $350 billion, and the ratio of this aggregate top-five compensation to the aggregate earnings of these firms increased from 5 percent in 1993-1995 to about 10 percent in 2001-2003.
At the same time, few firms want to admit to having average executives, so they seek to compensate their executives at above-average levels. They survey executive compensation at corporations and then set compensation packages that are above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average and their collective pay spiraling out of control.
VRX’s SummaryCompensation Table shows that J. Michael Pearson, CEO, was the highest paid named executive officer (NEO) at about $36.7M in 2011. I’m using Yahoo! Finance to determine market cap and Wikipedia’s rule of thumb regarding classification. According to those sources, at about $14.6B DWA is a large-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9&10), using data from Equilar, the median pay at large-cap corporations was $10.8 million in 2010, so VRX’s pay is well above that median. I voted against the pay plan and “Talent and Compensation Committee” members: Power, Farmer, Ingram, Morfit, and Paul.
I received new information on 5/24/2012 and revised my vote. See annotations in grid below.
Mark your calendars; shareowners for next year are due March 16, 2012.
And here’s how I actually voted, using Moxy Vote’s proxy voting platform.
|Proxy Measueres||CorpGov.net Vote|
|RONALD H. FARMER||
|ROBERT A. INGRAM||
|G. MASON MORFIT||
|LAURENCE E. PAUL||
|J. MICHAEL PEARSON||
|ROBERT N. POWER|
|NORMA A. PROVENCIO|
|LLOYD M. SEGAL|
|Board Proposals||Your Vote|
|THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS SECTION, EXECUTIVE COMPENSATION TABLES AND ACCOMPANYING NARRATIVE DISCUSSIONS CONTAINED IN THE MANAGEMENT PROXY CIRCULAR AND PROXY STATEMENT.|
|TO APPOINT PRICEWATERHOUSECOOPERS LLP (UNITED STATES) AS THE AUDITORS FOR THE COMPANY TO HOLD OFFICE UNTIL THE CLOSE OF THE 2013 ANNUAL MEETING OF SHAREHOLDERS AND TO AUTHORIZE THE COMPANY S BOARD OF DIRECTORS TO FIX THE AUDITORS REMUNERATION.|