Pay spins – out of control. Major corporations are inventing new metrics with which to obscure the amounts they are paying CEOs and other top execs. The Wall Street Journal notes that so far this year 228 companies define exec comp as “realized” or realizable” pay in proxies — up from 119 companies last year. The definition of “realized” differs from company to company and companies are free to change their own definitions year to year. Some examples: GE CEO $7.82 million (realizable) vs $21.6 million reported to regulators; HP CFO $2.8 million (realizable) vs $11 million reported to regulators; Exxon CEO $24.6 million (realizable) vs. $34.9 reported to regulators. Executive compensation remains a hot button issue for investors and companies are having greater difficulty getting shareholder support for pay packages. Yet, rather than reform their practices or better align incentives with shareholders’ interests, some companies are resorting to smoke and mirrors to hide business as usual.
Burnin’ mad in the bayou. Louisiana Municipal Police Employees’ Retirement System has sued Simon Property Group over a $120 million stock award granted to CEO David Simon last year. The award, now worth $146 million, made Simon the #2 highest-paid executive last year. The suit argues not only that the award should have been put to a shareholder vote but that the NYSE abdicated its own rules designed to protect shareholders from questionable pay practices. The NYSE requires that shareholders vote on pay plans that undergo material changes, such as a change that would significantly dilute shareholders’ stake or a change that expands the types of awards under the plan. While there are technical arguments on both sides, the NYSE sided with Simon. It is an unenviable position for an exchange. On one hand the exchange wants to encourage good governance and fair play for its listed companies. On the other hand, the exchange wants to keep companies it has listed and attract more to the exchange. If an exchange gets a reputation for being “anti-corporation” it could suffer defections. We’ll watch this one.
They’re baaaack. Big, fat birthday bashes are back, at least in the small world of mega private equity funds. Paul McCartney and John Fogerty headlined the 700-person party TPG founder David Bonderman held for himself at the Wynn in Las Vegas. McCartney is reported to receive north of $1 million for this kind of private gig. (PE guys seem to love this kind of thing. In 2010, Elton John played at Leon Black’s (Apollo) birthday and in 2007 Rod Stewart performed at Stephen Schwarzman’s (Blackstone).) All this just days after Mitt Romney lost the presidential election, in part, due to his affiliation with the billionaire’s boy club (real or perceived) image of the PE industry. This kind of in your face consumption shows how out of touch the industry can appear (think Lloyd Blankfein’s now famous line equating investment banking to God’s work). Even when the going is tough, PE can’t seem to lie low. TPG’s returns have been “tepid,” as big bets on WaMu and Energy Future Holdings have flamed out. The kicker? TPG owns Caesars, just down the street from the Wynn. Ironically, its own portfolio company wasn’t good enough to serve as the venue for the party.