GT Advanced Technologies $GTAT is one of the stocks in my portfolio. Their annual meeting is coming up on 6/5/2014. ProxyDemocracy.org had collected the votes of one fund when I checked and voted on 5/26/2014. I voted with management 60% of the time. View Proxy Statement. Read Warnings below. What follows are my proxy voting recommendations for GTAT.
Compensation
GTAT’s Summary Compensation Table shows CEO Thomas Gutierrez was the highest paid named executive officer (NEO) at about $5.3M in 2013. I’m using Yahoo! Finance to determine market cap ($2.2B) and Wikipedia’s rule of thumb regarding classification. GTAT is a mid-cap company. According to Equilar (page 6), the median CEO compensation at mid-cap corporations was $4.7 million in 2012, so GTAT is over that, especially factoring in that it is close to the borderline between small- and mid-caps. GTAT shares outperformed the NASDAQ substantially over the one and two periods, while beating it slightly over the five year period.
The GMIAnalyst report I reviewed gave GTAT an overall grade of ‘C.’ According to the report I read at GMIAnalyst:
Unvested equity awards partially or fully accelerate upon the CEO’s termination, characteristic of 90.2% of companies in the home market. Accelerated equity vesting allows executives to realize pay opportunities without necessarily having earned them through strong performance.
The company has not disclosed specific, quantifiable performance target objectives for the CEO, in contrast to 73.9% of companies in its home market that have provided such metrics. Disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
The company pays long-term incentives to executives without requiring the company to perform above the median of its peer group, which is the case for 90.7% of companies in the Russell 3000 index. Incentive plans that pay for mediocre performance undermine the linkage between pay and performance.
The company’s failure to establish and disclose specific standards regarding minimum equity retention standards for its CEO may weaken the ability of equity awards to align executives’ interests with long-term value creation.
Because of these issues, I voted against the pay plan, stock plan and, if given the opportunity, would have voted against members of the compensation committee: Godshalk (Chair), Watson and Wroe.
Other Proxy Issues
I voted to ratify the auditors, since Deloitte & Touche LLP doesn’t appear to be doing any conflicting consulting work for GTAT. Since there were no other proxy issues, I didn’t do a more in-depth analysis.
| NUM. | PROPOSAL TEXT | CorpGov | CBIS |
|---|---|---|---|
| 1.1 | Elect Director J. Michal Conaway | For | For |
| 1.2 | Elect Director Kathleen A. Cote | For | For |
| 1.3 | Elect Director Ernest L. Godshalk | Withhold | For |
| 1.4 | Elect Director Thomas Gutierrez | For | For |
| 1.5 | Elect Director Matthew E. Massengill | For | For |
| 1.6 | Elect Director Robert E. Switz | For | For |
| 1.7 | Elect Director Noel G. Watson | Withhold | For |
| 1.8 | Elect Director Thomas Wroe, Jr. | Withhold | Withhold |
| 2 | Ratify Auditors | For | Against |
| 3 | Ratify NEO Compensation | Against | For |
Mark your Calendar
Stockholder proposals for the 2015 Annual Meeting of Stockholders (the “2015 Annual Meeting”) must be received at our principal executive offices by December 23, 2014, and must otherwise comply with the SEC’s rules, to be considered for inclusion in our proxy materials relating to our 2015 Annual Meeting.
Issues for Future Proposals
Looking at SharkRepellent.net: - Plurality vote standard to elect directors with no resignation policy.
- Board is authorized to increase or decrease the size of the board without shareholder approval.
- Directors may only be removed for cause and only by the vote of 66.67% of the shares entitled to vote.
- No action can be taken without a meeting by written consent.
- Shareholders cannot call special meetings.
- Supermajority vote requirement (66.67%) to amend certain charter and certain bylaw provisions.
Warnings
Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime).I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at 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, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.
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