Stockholder activists, quoting GovernanceMetrics Int'l/The Corporate Library, co-founded by Nell Minow, the "queen of good corporate governance" (BusinessWeek), are pressing for pay and governance reforms at Omnicom, the $14 billion conglomerate that owns FleishmanHillard, Ketchum, Porter Novelli and other PR firms.
A proposal calling for executives to keep their stock until retirement was defeated by a vote of 172,659,830 to 40,490,687 at the annual meeting May 21 in Cincinnati. The dissidents had obtained 18.9% of the votes cast.
Minow is called the "CEO killer" by Fortune, which credits her with helping to oust underperforming CEOs at Sears, America Express, Kodak and Waste Management. The stockholder proposal, filed by John Chevedden of Redondo Beach, Calif., is also critical of pay packages of CEO John Wren and other executives and how some elements of the packages are created.
The proposal objects to half of the annual incentive pay for execs being based on "subjective performance."
"Subjective performance can undermine pay-for-performance," said the stockholder proposal that was defeated.
Wren, it notes, was given $10 million in cash bonuses in 2012 and $4 million in restricted stock units as part of his incentive pay. The proposal noted that Wren has a potential $13 million entitlement should he quit voluntarily.
It quoted a Conference Board Tax Force report that said hold-to-retirement rules give executives "an ever-growing incentive to focus on long-term price performance."
Pay Committee Gets Bad Marks
Minow, the daughter of ex-Federal Communications Commission chair Newton Minow, co-founded The Corporate Library in 1999 which merged with GovernanceMetrics Int'l and Audit Integrity. The combination rates 18,000 public companies worldwide, providing in-depth coverage of 4,200.
GMI/The Corporate Library has given OMC a "D" since 2005, saying it has a "Very High Concern" for executive pay including Wren’s $15 million 2012 pay; "High Concern" for directors’ qualifications, and regards OMC as having a "High Governance Risk."
OMC directors are in their posts too long and risk being too identified with company policies, says GMI.
It notes that six of the directors are aged 71-83 including 60% of the audit committee. Members of the executive pay committee received the highest negative votes of GMI.
Nine directors each had 10 to 26 years long-tenure including more than 80% of the nomination committee.
"Director independence erodes after 10 years," said the stockholder proposal. GMI says long-tenured directors
"form relationships that may compromise their independence and therefore hinder their ability to provide effective oversight. A more independent perspective would be a priceless asset for our directors."
Specifically criticized were director Alan Batkin, who was said to be involved with the Overseas Shipholding Group bankruptcy, and Leonard Coleman, involved with the Owens Corning bankruptcy.
"Together they controlled 30% plus of our executive pay committee related to the $15 million for Mr. Wren. Mr. Coleman received our highest negative votes," said GMI.
The directors each receive OMC stock worth $31,250 each quarter.
Minow, Surowiecki Knock Boards
Minow, who also writes as the "Movie Mom" about movies, TV, the internet and parenting, was an attorney for the U.S. Dept. of Justice and Environmental Protection Agency. Her reviews appear in the Chicago Tribune, Chicago Sun-Times, USA Today and on Beliefnet.
She told a meeting of the National Investor Relations Institute that members of boards "lose half their I.Q.s and all of their guts."
Another critic of boards is James Surowiecki of The New Yorker who says boards are hotbeds of conformity. The directors themselves may be captains of industry but in a boardroom they tend to turn into "meek conformists," he wrote March 8, 2004. In a column titled "Board Stiff" on June 1, 2009, he noted boards of banks involved in the financial collapse had done virtually nothing yet all members got re-elected anyway.
Also quoted was a report by GMI/The Corporate Library that has given OMC a "D" since 2005, labeling it a "High Governance Risk." The firm, which rates corporate governance practices, also expressed "Very High Concern" about CEO John Wren’s pay package and "High Concern" for director qualifications.
All members of the executive pay committee of OMC received the "highest negative votes" of GMI/The Corporate Library.