Zimmer Biomet Holdings: Company Reverses Commitments, Disconnecting Pay and Performance

May 13, 2022

Chair, President and CEO Bryon Hanson’s total disclosed compensation from Zimmer Biomet Holdings was $14,981,058 in 2021. The compensation committee has reversed itself on past commitments and a significant number of shareholders are expected to vote against this pay plan.

The company spun off its Dental and Spine businesses into a standalone, publicly traded company, ZimVie on March 1, 2022. The company offers some disclosure on how it achieved what it called the “Equity Exchange Ratio.” Discussions of actions taken in the proxy statement under the heading describing the ZimVie Inc spinoff. However, it is hard to evaluate the process. And several items listed under the discussion seem unrelated to the spin off.  Specifically, conditions for the 2020 Performance Share Restricted Stock Units (PRSU) were not met and that was clear before the spinoff. As Zimmer put it, “the company PRSUs were not projected to meet threshold achievement for payout due to business declines associated with the COVID-19 pandemic.” However, Zimmer deemed that a 50% payout level has been met.

Just like that, by decree, pay and performance were disconnected.  This change makes a mockery of so much of what is written in so many proxy statements. It should make all shareholders aware of the tenuousness of corporate promises.

In addition, the company converted 2021 PRSU to simply restricted stock units. There are no longer performance-based requirements. The shares now become what were once called “pay for pulse.”