Western Digital achieved just 41.9% support for its say on pay proposal, becoming the fifth S&P 500 company to fail its say on pay vote this year, while Oracle lost its say on pay vote for the sixth consecutive year . Currently, 484 of S&P 500 companies have posted their Say on pay results, with average support of 91.9% and median support of 95.2%.
Western Digital has historically had high approval rates on their Say on Pay historically, with 94.7% last year and above 95% in previous years. The company acquired SanDisk for approximately $1.6 billion on May 12, 2016, and Western Digital’s stock price has been going up since the acquisition. According to the company, “from the close of the SanDisk Acquisition to the end of Fiscal 2017. Western Digital generated TSR of 153%”.
The issue with Western Digital Say on Pay came from an adjusted payout under fiscal 2016-2017 LTI PSU awards to recognize the impact of the acquisition. According to the proxy statement, the PSU award metrics are cumulative revenue and cumulative operating income, both weighted 50%. The company lowered the performance goals by 7.7% at the end of the performance period according to total available market, as it has historically done, lowering the revenue target from $28.032 billion to $25.885 billion, operating income target from $3.84 billion to $3.54 billion. The company reported revenue of $23.6 billion and operating income of $2.72 billion, or achievement against the target goals of 91% and 77%, respectively, which would have resulted in a payout rate of 71% for revenue and 0% for operating income. Overall, with each payout rate weighted equally, the total payout would have been 35% of target.
However, the compensation committee decided to raise the payout rate to 90%, based upon the changes in the company’s business related to the SanDisk acquisition and a shift in business strategy related to the lifting of regulatory restrictions affecting the company’s flash memory and other storage devices, rather than hard drives. Based on these factors and other non-GAAP adjustments, the company reported it had achieved 93% of the revenue target (compared to 91% previously) and 102% of the cumulative operating income target (compared to 77%), leading to an overall PSU payout rate of 90%. The company also disclosed that if the full SanDisk operations had been included, the payout rate would have been 200%. However, shareholders did not support the rationale.
Oracle Loses Its Sixth In a Row. With co-CEOs receiving a combined summary compensation table amount exceeding $80M in addition to company founder and former-CEO, now Chief Technology Officer, Larry Ellison's $41M dollar award, Oracle failed once to achieve majority say on pay support. The company, widely known for its high executive compensation levels, has now failed to achieve majority support for the sixth consecutive year, after successfully doing so in 2011. Oracle's inability to achieve majority support is particularly noteworthy given the fact that Mr. Ellison owns 28% of the company's shares. Even with Ellison's votes, the company's perennial high pay amounts have rendered Oracle shareholders disgruntled and given the company a reputation as an excessive payer which it seemingly reinforces on an annual basis. Also of interest, the company's shareholders voted down a gender pay equity reporting proposal put forward by Pax World Mutual Funds which called for the company to produce a report on gender pay equity at the firm. The proposal has been a frequently voted issue among tech companies and particularly those in Silicon Valley. While receiving much press, the attention and discussion has yet to translate into results.