More than 40% of Vornado Realty Trust’s shareholders voted against CEO Steven Roth’s pay Thursday in a potent gesture of investor discontent.
The vote was in response to Vornado doubling the pay of its longtime CEO, to $19.7 million last year, at a time when Manhattan’s second-largest commercial landlord slashed its dividend payout by 68% due to falling earnings. Roth’s compensation was mostly paid in shares and stock options, but he also was granted a $3.7 million cash bonus, most of which rewards him for a project that won’t be finished for eight years.
Citing “unmitigated pay-for-performance misalignment,” Institutional Shareholder Services recommended investors vote against Roth’s pay at Vornado’s annual meeting, and 43% of shareholders did so.
The Vornado vote stands in contrast to votes at other public companies. Shareholders in Russell 3000 companies have approved CEO pay packages this year with average support of 92%, according to consulting firm Semler Brossy. Only two CEO pay packages were rejected this year, both for energy companies.
So-called say-on-pay votes have been mandatory for public companies since the financial crisis and are non-binding. But an embarrassing outcome can cost a CEO their job. Former Citigroup CEO Vikram Pandit was shown the door after a majority of investors voted against his pay in 2012. The more common result, however, is a few tweaks and assurances that performance and pay will be better aligned in the future.
Last year, 23% of shareholders voted against Roth’s pay. Opposition rose this year after Vornado’s board awarded Roth a $2.2 million cash bonus in December that was linked to redeveloping 350 Park Ave. into a supertall tower for hedge fund mogul Ken Griffin’s firm, Citadel. The project isn’t expected to begin construction until next year and finish in 2032 but members of the board’s compensation committee rewarded Roth and other top officials for “seeking and finding new opportunities.”
Vornado’s compensation committee is chaired by Daniel Tisch, a son of former Loews Corp. chief Laurence Tisch, and includes former mayoral candidate Ray McGuire.
The bonus didn’t sit well after investors swallowed a substantial dividend cut.
“The optics of creating a new…bonus pool when earnings continue to decline doesn’t look good,” said Piper Sandler analyst Alexander Goldfarb when the payment was disclosed.
In a regulatory filing, Vornado said bonuses based on long-term development projects will “only be made on an episodic basis” and not annually. ISS observed that bonuses awarded to Roth and others “do not appear to have been conditioned on pre-set forward-looking goals.”
The company’s stock traded Friday at $23.50 a share, two thirds below its pre-pandemic level.
Vornado declined to comment.
Aaron Elstein , 2024-05-24 17:31:28
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