By Greg Ruel- Research Associate
In April 2011, Janus Capital Group received just 40.12% support from shareholders on executive compensation plans. Indeed, only two companies of those required to hold an advisory compensation vote last year received less support than Janus Capital: Stanley Black & Decker (37.95%) and Constellation Energy Group, Inc. (38.04%) . The failed shareholder vote has some inspired change at Janus; as evidenced by language in its proxy released yesterday:
Our Compensation Committee's 2011 reevaluation of our compensation practices and programs took into account: (i) the results of our 2011 say on pay vote; (ii) the recommendations of the Compensation Committee's independent Compensation Consultants; and (iii) discussions with shareholders regarding our compensation practices and the 2011 say on pay vote.
CEO Richard M. Weil was awarded a $10 million signing bonus in 2010. Going forward, his annual compensation opportunity will be capped at $10 million, meaning his target compensation at the time he was hired is now his new ceiling. Mr. Weil’s 2011 total compensation figure is a 40% reduction over 2010’s, even after excluding the $10M bonus award.
Other significant compensation changes include the introduction of new performance-based equity awards that are contingent on rise in stock price, to replace previously issued time-vesting equity grants. Also, a portion of Mr. Weil’s 2012 variable compensation will be based on year-over-year change in operating income. Previously, all awards were discretionary, determined by the compensation committee based on a subjective assessment of individual and company performance.
These compensation policy enhancements are a great start for a company sorely in need of a tighter link between pay and performance. Janus is also the latest example of policy improvements that can result from pressure by shareholders and a willingness on a company’s part to engage shareholders on such issues.
