More than 40 percent of the shareholders of BlackBerry Ltd. expressed dissatisfaction with the company’s compensation practices at its annual meeting amid controversy over stock payments for chief executive John Chen.
Glass Lewis & Co. and Institutional Shareholder Services Inc. (ISS), two large proxy advisory firms, recommended a “no” vote on BlackBerry’s non-binding vote on executive compensation, also known as ” say on pay ”. Only 59 percent of shareholders voted in favor. It is common for shareholders of Canadian companies to vote over 90 percent in favor of compensation approval motions.
Even though votes are not binding, compensation experts say companies feel great pressure to undertake reforms when support is weak.
“The compensation resolution was approved by a majority of votes cast,” Phil Kurtz, deputy general counsel and general secretary of BlackBerry, said at Wednesday’s meeting. “Nonetheless, support for the motion fell short of our expectations. Mr. Kurtz said the BlackBerry Board of Directors Compensation Committee believes its compensation package is necessary to attract and retain talent.
“Having said that… the board and committee will be reviewing the outcome of our vote today as part of their ongoing assessment of the company’s compensation program,” he said.
BlackBerry’s compensation practices have already grabbed the headlines due to the large stock awards it grants to Mr. Chen. In 2018, Mr. Chen received a stock award of five million shares plus a long-term bonus plan that could bring in nearly $ 400 million if BlackBerry shares hit the $ 30 level in the past. next five years.
Glass Lewis noted that some of Mr. Chen’s more recent stock awards vested, or became usable, in large part because BlackBerry has become a “meme stock” in recent months. Meme stocks are stocks of companies that are heavily promoted on social media, often by individual investors. Stock prices of memes are often volatile and not necessarily tied to a company’s performance.
Mr. Chen earns each block of one million shares of the 2018 award if BlackBerry shares – traded in Toronto and New York – meet the targets in dollar increments of US $ 16 to US $ 20. The targets looked aggressive in 2018, when BlackBerry shares were trading at US $ 10.63.
BlackBerry became a beneficiary of the meme stock madness in late January, when its stock doubled in less than a week, hitting all five price targets in one day and briefly trading above $ 28. BlackBerry revealed in its proxy circular that three million of the five million awards will be earned this year. The shares closed at $ 16.17 on the Toronto Stock Exchange on Wednesday.
ISS said Mr. Chen’s guaranteed bonus and salary is above average compared to peers in the company. ISS also said BlackBerry does not disclose incentive pay targets for other executives, making it difficult to assess the link between pay and performance.
Glass Lewis and ISS recommended that shareholders withhold the votes of director Prem Watsa, CEO of Fairfax Financial, who is BlackBerry’s principal independent director and chairs the board’s compensation committee. BlackBerry said it personally negotiated Mr. Chen’s contract extension in 2018 and the allocation of shares.
Mr. Watsa received 82.6 percent of the shareholder vote. Last year it won the support of 90 percent of shareholders.
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