AIG

Annual Meeting: May 21, 2019

CEO Brian Duperreault received total compensation of $21 million for 2018. This included a salary increase to $1.6 million and a stock award of $11.7 million. Every executive listed in the summary compensation table had a salary over one million dollars and total compensation of over $9 million. Pay is also unusually high for named executive officers.

Last year, when ISS and Glass Lewis recommended against Duperreault’s pay, it was based in part on an extraordinary bonus of $12 million that raised his total compensation to $43 million. Despite the recommendations, however, the advisory vote passed with support of 62.3% of votes cast.

Proxy Insight provides information the votes by number of shareholders as well as number of shares, and it is strikingly different. Of the discreet entities that cast votes on pay at AIG in 2018 there were 241 that voted against pay and only 68 that voted for. Why do those figures seem so at odds? The five shareholders that owned the most stock (Vanguard, Blackrock, T. Rowe Price, Capital Research Global, and SSgA Funds) each voted in support of the pay package. As I scroll down the Proxy Insight screen further it shows a long list of “against” votes, yet these do not balance out the support from the largest shareholders. This highlights the out-size role some large investors play and is of considerable concern given that a report today notes that the half of all capital invested is in index funds.

Both ISS and Glass Lewis recommended voting against the pay proposal again this year, according to a Reuter’s article, “[Duperreault’s] pay compares with $10 million to $17 million for CEOs of major U.S. competitors Prudential Financial Inc, Travelers Companies Inc., and MetLife Inc.”

The Reuters article quoted Glass Lewis: “The company paid more than its peers, but performed significantly worse than its peers."

If the large passive index funds accept that it gives license to other companies to overpay as well, a problem for all shareholders.