For the second year in a row, Ameriprise Financial shareholders have voted against the company's executive-compensation plan, despite changes to the plan prompted by talks with the largest shareholders.
This year, 34% of shareholders approved the company's revised pay plan of CEO James Cracchiolo and other executives. Last year only 25% of Minneapolis-based Ameriprise Financial shareholders gave approval to the annual nonbinding say-on-pay proposal on executive compensation.
Shareholders approved the other two proposals in the proxy this year, re-electing members of the board of directors and approving the company's auditor.
"Over the past year, we had extensive dialogue with our shareholders and made significant changes to our 2018 executive compensation program," said Paul Johnson, a vice president at Ameriprise Financial. "The board will consider this additional feedback and will continue to evolve our program to ensure alignment between our executives' compensation and shareholder value creation."
Votes on shareholder proposals are heavily influenced by proxy-advisory firms — including two leaders in the field, Glass Lewis and Institutional Shareholder Services, both of whom recommended shareholders vote against the say-on-pay proposal at Ameriprise again this year.
Glass Lewis acknowledged the changes that Ameriprise has made to the executive compensation plan in its report but still gave Ameriprise a "D" for its pay-for-performance grade and recommended shareholders vote against the plan.
Glass Lewis wrote in its report that Ameriprise didn't "sufficiently" link the company's financial and share performance to executive pay. Ameriprise had good financial results in 2018. Total shareholder return, though was down 36.8%.
Ameriprise did offer more disclosure in its proxy statement this year, and in response to the reports published by Glass Lewis and ISS, officials issued a supplementary proxy statement with more disclosure in an effort to gain shareholder support.
"On the face of it, the company made positive changes to the executive-compensation program that noticeably reduced CEO cash incentive pay year-over-year and will also reduce equity grants in fiscal 2019," Glass Lewis wrote in its report. "However, we believe that quantum of CEO pay remains a driving concern. Mr. Cracchiolo's total compensation continued to be the second highest among peers used in this year's pay for performance analysis and at the 88th percentile in the company's self-disclosed peer group."
Failing a say-on-pay vote is a rare occurrence. Failing a say-on-pay vote more than once is even more rare, according to Semler Brossy, an independent executive consulting firm that tracks the issue.
In the 2019 proxy season through April 19, of the 137 companies that had conducted the votes, the average vote received 91.5% support, the firm said. Just 1.9% of the votes failed.
In 2018, the average say-on-pay vote was 90.2%, and in 2017 it was 91.7%.
For say-on-pay, less than 50% support is a failing vote, but for some companies anything less than 90% approval might be cause for concern. Todd Sirras, a managing director at Semler Brossy, said companies should take action when they get a vote total they don't expect.
"When the vote is below 70%, the proxy-advisory firms have a policy that says the next year we are really going to look more closely at this," he said.
Only 59 companies Semler Brossy has tracked have failed the vote multiple times, including the Tutor Perini Corp., a construction-services company based in California which has failed the vote eight times.
Others include Oracle Corp. — which passed its vote in 2018 with just 54% support, but failed the vote six times — and Bed Bath & Beyond Inc., which failed its last four votes.
Local companies that have failed the say-on-pay vote include TCF Financial Corp. in 2014 and 2015; Target Corp. in 2013; Best Buy in 2012; and Regis Corp. in 2011.