Ameriprise Financial
Annual Meeting: April 29, 2020
The Chairman and Chief Executive Officer of Ameriprise Financial, James Cracchiolo, received $24,516,930 in compensation in 2019. A frequent member of As You Sow’s 100 Most Overpaid CEOs, he made the 15th spot this year.
Cracchiolo’s compensation was not met with much support. An almost unheard of 66.1% of investors voted against the CEO’s pay last year. Voters opposed the pay in part because 40% of Cracchiolo’s awards were purely time-based rather than performance-based. Notably, some of his performance-based awards vested with a below-median target. All in all, Cracchiolo’s awards looked like unnecessary grants, and shareholders took notice.
In response to shareholder discontent, Ameriprise did take steps to ameliorate executive compensation issues. They lowered target and maximum payouts, disclosed the overall target payout opportunity for the CEO, improved metric-related disclosure, and increased the proportion of compensation granted in equity. Shareholders may appreciate these steps, but also likely hold onto concerns over ongoing pay-for-performance misalignment and exorbitant CEO pay, particularly given the amount of wealth Cracchiolo has amassed over time through option exercises.
Strikingly, the CEO received large equity awards, stock awards valued at over four million dollars and options with an estimated value of more than three million dollars, amid sustained total shareholder return underperformance and following negative returns in 2018. The lack of forward-looking disclosure of performance targets for the award does not allow investors to adequately assess the rigor of the program.
In defense of this practice, Ameriprise stuck to its usual proxy song: “The committee believes that reducing or limiting current stock option grants, RSUs [Restricted Stock Units] or other forms of compensation because of prior gains realized by an executive officer would unfairly penalize the officer for high past performance and reduce the motivation for continued high achievement.”
Cracchiolo has a long history of receiving large shares of company stock and managing to hold fewer of them year-over-year. I recorded this practice in a blog for the period between 2013 to 2017. It remains true today. Cracchiolo started 2018 with 964,621 shares and started 2020 with 744,716. Significantly, in just a three-year time frame, Cracchiolo holds 219,905 fewer shares of the company’s stock he’s supposed to be steering to profit. This is an amazing feat considering he exercised options worth 520,140 shares, a value of $40,799,232, and received 177,287 vested shares for a value of $24,320,064, over the same period. In just 2019, he received 70,340 vested shares worth $9,076,722.
At a certain point, when do such awards not align a CEO’s interests with shareholders’ interests? If he is selling his stock, then he is simply lining his own pockets. Investor voices matter and are needed to continue pressure against excessive wealth accumulation that does not benefit shareholders.
While Ameriprise workers make a median pay of $106,428 per employee, the pay ratio of CEO to employee is 230:1.