Abbott Laboratories

Annual meeting: April 27

Abbott CEO Mike White had total disclosed compensation of $16,772,295 in 2017, with a median employee to CEO pay ratio of 251:1.

ISS has recommended against pay at Abbott and Abbott fought back with a vituperative filing at the SEC.  It has become more common for companies to challenge the proxy advisory firms when they recommend against pay packages, but this tone is unusual.

ISS found pay for performance concerns at Abbott in comparison to peers. Much of Abbott’s rebuttal focuses on how ISS “manipulated” the peer group. As I understand it, ISS has detailed specific policies for peer group comparisons. Abbott’s repeated use of the accusation that ISS “manipulated” its peer group rings hollow when what ISS did was evaluate the company’s listed peer group.

The four companies Abbott listed as peers and ISS did not include were: Coca Cola, Johnson Controls, Mondelez and United Technologies.  It seems reasonable to me that executives of a sugary soft-drink maker and of a global healthcare company are not likely to have similar, interchangeable skills.

Abbott is also frustrated that the advisory firm didn’t consider the change in Abbott’s size based on acquisitions St. Jude and Alere in 2017. As the company states the purchases “increased our size and had a substantial impact on our financial metrics.” However, it is reasonable to question how executives should be rewarded for those financial metrics.

As for size, General Electric presents a recent example of how growth by acquisition inflates size and pay but may not be wise strategically. Indeed, growth can mask internal problems. I am not commenting on the specifics here of Abbott’s acquisitions, just pointing out that shareholder skepticism is generally warranted.

Finally, CEO White has been generously compensated for years, including through stock options he has exercised. I wrote about this in 2015. He has continued to exercise options since that time.