We periodically razz companies that thumb their noses at investors’ wishes: In some cases they keep directors around despite resounding no-confidence votes from shareholders. In others they seemingly ignore it when a sizable minority of their stockholders votes against the board’s recommendations on a shareholder proposal or director nomination.
So let’s call attention to a company that is, in its own way, acknowledging shareholder discontent: Allstate (ALL), which on Wednesday afternoon quietly filed an 8-K noting a variety of changes to its severance, options and restricted-stock award agreements.
At first glance, these changes look a lot like end-of-year housekeeping. But, whether by design or coincidence, the changes also appear to address some of the criticisms leveled at the company’s pay practices by Institutional Shareholder Services, the behemoth of the proxy-advisory business.
It’s worth noting that ISS’s criticisms last year didn’t fall on deaf ears: Allstate’s board came close to losing its say-on-pay vote (which passed 52% to 43%), and a significant proportion of shares were voted against a number of its directors, with anywhere from 31% to 47% of votes withheld. (See the results disclosed May 18.)
Last spring, ISS had criticized a number of practices at Allstate, from failure to give shareholders holding 10% or more of the company’s stock the right to call special meetings, to the way Allstate calculated stock-option compensation. It also took Allstate to task for eliminating tax gross-ups only for new executives; sitting execs got grandfathered in. (Amusingly, Allstate appeared to have disclosed its response to ISS last spring preemptively — before ISS’s criticisms were made public.)
The most prominent changes disclosed yesterday eliminate tax gross-ups on severance benefits; end a “lump sum cash pension enhancement” that effectively goosed the size of executives’ retirement benefits under certain termination scenarios; and, for everyone but Chairman and Chief Executive Thomas J. Wilson, lower the multiple applied to base pay in determining severance. The board also made it harder for new stock and option awards (those granted after Friday) to vest if the company changes hands: The execs must now lose their jobs to cash out, rather than being able to do so simply because of a deal.
After it disclosed its annual-meeting results earlier this year, Allstate was noncommittal about its planned response to shareholders: For an article on say-on-pay in The Fiscal Times, an Allstate spokeswoman told me the board planned to “thoroughly analyze the issues and external environment in consultation with its advisors” — corporate-speak, as far as I can tell, for, “We’ll see.” (Other companies said much the same at the time: Johnson & Johnson (JNJ) promised unspecified changes in response to a 39% “no” vote; fund-manager Janus Capital Group (JNS), which saw its say-on-pay measure fail with a 60% “no” vote promised unspecified but “improved accountability.”)
Now Allstate’s response is clearer: It has made changes that appear to be in direct response to ISS’s criticisms. Whether they’ve gone far enough to avoid another spanking from the proxy advisory firm — and how far other companies will go to avoid similar results — remains to be seen.
At any rate, it will add a little zest to this year’s proxy season.
There’s only one more day to vote for the worst footnote of 2011! Cast your vote here. We’ll be announcing the results tomorrow morning!
Over on footnotedPro, we’re preparing for the end-of-year Friday night dump, when companies haul out their most pungent disclosures just before the holiday weekend. We’re expecting some interesting stuff at the end of the week. For more information or to inquire about a trial subscription, please contact us.