Howmet Aerospace

May 25, 2021

Howmet Aerospace Chairman and co-CEO John Plant’s salary and stock award both increased in 2020 as part of his total reported compensation of $37,351,008. Surprisingly, his high pay in 2020 was 24% less than he earned in 2019. In fact, Howmet was ranked number 4 on our list of companies with overpaid CEOs in our most recent report when 47.8% of shareholders voted against the pay plan.  

In its rationale against pay, the University of California explained (disclosed on subscription-only Insightia):

“…the company granted the new CEO two sizeable equity grants in 2019 in addition to a potential 20 million USD bonus opportunity. While new hire awards are a common market practice, the term of the CEO's initial and secondary employment arrangements were relatively short given the magnitude of the grants. Further, the first equity grant, valued at over 17 million USD and the cash bonus have already vested or been deemed earned.”

Plant’s pay amounted to an astonishing total of $51,712,578 in 2019. That agreement, signed in February 2020, was subsequently amended in June 2020 to grant Plant additional time-vested restricted share units and performance-based restricted share units (PRSU). Furthermore, the amendment reset the share-price target for the PRSU from $22 to $16.25.

In April 2020, Howmet promoted Tolga Oal from his position as President of the Company's Engineered Structures business to co-CEO. His new role included a salary increase to $875,000 and an annual equity award of $3,500,012. The board said it is using a co-CEO transition structure because “[Oal] did not have previous CEO experience.” However, very few CEOs have CEO experience before becoming CEOs. Rather, it is more typical to have a transition consulting agreement with a departing CEO in a situation like this.

Changes were made for other executives’ long-term incentives as well. First, the company removed several important performance metrics, including revenue and pre-tax RONA, making the entire incentive award based on EBIDTA margin. Even more problematic was the company’s decision to move from a three-year performance period (hardly long in itself) to three one-year performance periods with targets set at the beginning of each year. It is important to note that the point of longer performance periods is to encourage executives to look beyond the immediate to a slightly broader horizon. Instead, what we have here are essentially three additional annual incentive awards.