The issue
In June 2023, Alphabet Inc put forward an advisory (non-binding) shareholder vote to ratify its executive officers’ compensation package. The proposed compensation package included:
- a triennial equity grant to the CEO valued at $218m, 40% of which was time-vesting and therefore not linked to performance;
- a sustainability component in the annual bonus, but this was not linked to pre-set goals disclosed in advance and was awarded on a discretionary basis by the remuneration committee; and
- a long-term incentive plan which switched in 2022 predominantly to time-vested equity, with no rationale given for this change.
We look carefully at resolutions relating to executive pay to ensure the shareholders’ long-term interests are protected and aligned so far as possible with executive pay.
Activity
A key component of a well-structured compensation plan is that variable pay should be linked to performance.
The three elements of the compensation package described above do not meet these requirements, given the share of compensation which is time-based or based on discretionary goals not disclosed by management.
Furthermore, notwithstanding the size and profitability of Alphabet, the scale of the CEO equity grant was out of alignment with peers.
Outcome
We voted against management in accordance with ISS advice and the principles set out in our voting policy. We were not alone; just under a quarter (24.3%) of votes cast rejected management’s recommendation. This was the second highest proportion of votes against any items on the ballot.
We hope this substantial dissenting vote will encourage the management of Alphabet to consider the need for a clear link to performance that can be measured objectively and disclosed transparently when structuring future pay awards.
For the duration of our holding, we will carefully scrutinise future remuneration proposals put forward by the company.