Tech industry takes another look at executive pay

Technology companies are hardly the most prominent villains in the ongoing drama over exorbitant executive pay.

Nevertheless, the industry is taking a leading role in giving shareholders more influence over top salaries — thereby pre-empting impending legislation, shielding compensation-committee members and sharpening technology's appeal to institutional investors.

Microsoft made one of the most recent high-profile moves on compensation last month, when it trumpeted its adoption of a so-called "say-on-pay" policy, which will let shareholders take a nonbinding vote on management's rewards every three years.

While Microsoft and other technology firms have fielded related shareholder proposals for years, the news took some by surprise.

"Microsoft is not a company I've heard people complain a lot about," said Ben Silverman, director of research at InsiderScore.com. "It never seemed to be an issue."

Instead, the call to rein in executive pay has been most closely associated with the Wall Street firms at the center of last year's market meltdown and subsequent government bailouts.

Still, soon after Microsoft's say-on-pay announcement, the Conference Board announced that supporters of the research group's new efforts to curb suspect executive-pay practices include fellow technology giants Cisco Systems and Hewlett-Packard.

Earlier, chip giant Intel endorsed its own say-on-pay provision in January, well ahead of a shareholder meeting where a related resolution would have been put up for a vote.

Even corporate-software titan Oracle, where CEO Larry Ellison is renowned for his extravagant compensation, has moved to rein in top officers' compensation — albeit while deflecting shareholder say-on-pay proposals.

Proactive move

The proactive efforts from technology firms on executive pay may stem from Silicon Valley's long-standing drive to operate outside of the influence of Washington. The Obama administration signaled support for say-on-pay legislation in June, and a related bill has since been passed in the House and received in the Senate.

"This is the last year you'll probably have the opportunity to put in your own version of say-on-pay," according to Patrick McGurn, special counsel to shareholder-advisory firm RiskMetrics Group.

Exec compensation

According to a study published recently by the Corporate Library, compensation for top corporate executives remained relatively consistent last year, even as the swooning markets sent share prices tumbling.

Moves by technology firms to potentially restrain executive pay could therefore distinguish them in the eyes of large, institutional investors. Those large investors — pension funds, hedge funds and others — have had to become more discerning amid the down economy, according to Silverman.

Oracle's proxy statement includes a shareholder say-on-pay proposal, which is opposed by the company's board as "counterproductive."

But the same filing disclosed that Ellison had agreed to cut his salary to $1.

"As a company, you need to try and attract institutional investors, and say-on-pay is certainly up that alley," he said.

McGurn, of RiskMetrics, said a strong say-on-pay policy "might be a tiebreaker" for a large player picking investments. But more important, McGurn said. a move now to address executive pay could protect board members later.

Rather then letting things come to a boil with a vote on board membership, accepting some form of say-on-pay creates a "safety valve," he said.

Oracle's proxy statement, filed in August, includes a say-on-pay proposal — which is opposed by the company's board. Such a move would be "counterproductive," the company advises, while noting that owners of only 23 percent of its outstanding stock voted for an identical proposal last year.

In Microsoft's proxy statement filed last week, the company noted that if it fields a "significant negative say-on-pay vote," it will consult with shareholders and take "constructive feedback" into account when making future decisions.

While Microsoft and others have moved voluntarily to address shareholder concerns on executive pay, Microsoft rival Apple was compelled to accept a surprise shareholder vote in favor of a say-on-pay policy earlier this year.

The company said in April that it "anticipates that new laws or regulations will require some form of say-on-pay vote at all public companies in the near future. ... Even if that does not occur, Apple is committed to implementing an advisory say-on-pay vote next year."