Just as voters find it hard to muster enthusiasm for local elections in the year after a presidential election, shareholder activists seem to be subdued in the current annual shareholder meeting season.
The meeting that tends to attract the most attention locally is Comcast Corp. The Center City-based cable TV and Internet service provider will hold its meeting in the Perelman Theater at the Kimmel Center for the Performing Arts at 9 a.m. Wednesday.
But this year's proxy statement contains just two shareholder-sponsored proposals, compared with four in 2012.
To me, the most interesting proposal, submitted by the International Brotherhood of Electrical Workers' pension fund, is about a compensation-related issue that is among the more prevalent items on proxy ballots this year. The union fund wants Comcast's board to prohibit the accelerated vesting of equity compensation awards (think: stock options or restricted stock) to senior executives upon a change in the control of the company.
In its supporting statement, the IBEW says that it's not seeking to block all severance payments should Comcast be acquired, just any practices that may "permit windfall awards that have nothing to do with a senior executive's performance."
If that sounds a bit esoteric, it may help to know that the current ardor for such limits emerged after the enormous exit packages Hewlett-Packard Co. recently paid following the board's ouster of not one, but two bungling CEOs in little more than a year.
The IBEW pension fund estimates that Comcast's five senior officers would be eligible for $139 million worth of long-term equity, including $43 million to CEO Brian L. Roberts, in a sale. It also cited Apple, Chevron, Dell, ExxonMobil, Microsoft, and Occidental Petroleum as having limitations on accelerated vesting of stock options and other equity incentives.
Naturally, Comcast is asking shareholders to vote against the proposal, urging that the board's compensation committee retain the flexibility to decide whether such accelerated vesting should or should not occur. Besides, the company says in the current proxy, none of the named executive officers' employment agreements requires that accelerated vesting occur under a change of control.
While the vesting proposal is more common this year than last, shareholders haven't been able to overcome corporate boards' opposition to it. The measure has failed to pass at Abbott Laboratories, AutoNation, CVS Caremark, DirecTv, Honeywell, and Walgreen this year. In addition, shareholders of Sunoco Inc. - where a change of control did in fact occur - rejected the proposal in 2011 by a vote of 35.73 million shares "for" and 43.27 million shares "against."
One possible reason shareholders haven't embraced the vesting limitation may be that they've tended to benefit from changes in control as well.
A study of 107 takeovers from 2005 through 2009 by two Loyola Marymount University professors concluded that takeover premiums were "significantly larger" when the CEO received the benefit of accelerated vesting compared to target firms where the CEO's equity awards simply continued to vest after the acquisition closed.
"Our evidence suggests that target CEOs who become 'titanically rich' also make their shareholders wealthier," states the 2011 paper by Susan Elkinawy and David Offenberg.
Still, with a titanic market value north of $100 billion, Comcast is unlikely to become a takeover target anytime soon.