Seeking Alpha

Over one-third vote against American Realty executive pay plan

  • Nearly 280M shares voted against the potential $222M executive pool for American Realty Capital (ARCP -0.4%) which could be realized over the next five years, representing 36.3% of all outstanding shares. Only 32.4% of the votes were in favor. The vote was an advisory (non-binding) one.
  • SEC Form 8-K
  • Previously: ARCP boss skips golf; set to earn a fortune
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Comments (25)
  • financeminister
    , contributor
    Comments (795) | Send Message
     
    I hold a large position in ARCP good enough to have access to the board. My son is also on the board so that makes my access even better. Ofcourse I disagree with this compensation plan but I will not vote against it.

     

    Instead I abstained as this was the most effective way for me to make a clear statement opposing the plan. I don't think going to war is a very good idea in most cases. There's a social dimension to being on a board. Even independent directors aren't really all that independent because they often want to keep a prestigious job that pays well and has relatively few duties. They do not look for Dobermans. They look for Cocker Spaniels and then they make sure their tails are wagging. If you keep belching at the dinner table, you'll be eating in the kitchen. So the best way to say no is not actually voting "No" but abstaining.
    2 Jun, 04:15 PM Reply Like
  • mbn
    , contributor
    Comments (511) | Send Message
     
    I respectfully disagree.
    I have been voting for over 35 years in the securities I hold. It is rare that management - type proposals are voted down. However, there have been quite a few over the years that seemed unfair to me, a shareholder, and I have voted against management. It does not always matter, as my vote is relatively small. But there have been several cases over the years where the shareholders have prevailed, and rightfully so. I believe this fits in that category.

     

    Abstaining does not always get the point across. Some may interpret a vote to abstain as uncaring one way or the other. A no vote resonates, loud and clear.
    2 Jun, 04:32 PM Reply Like
  • Rhianni32
    , contributor
    Comments (2014) | Send Message
     
    financeminister: I'm sure it sends a very harsh message against executive pay to have the board too afraid to give up their own pay and position by telling management no.
    You and your son are exactly whats wrong with corporate governance these days.
    2 Jun, 04:55 PM Reply Like
  • James Bjorkman
    , contributor
    Comments (668) | Send Message
     
    Thank you, Warren.
    2 Jun, 06:02 PM Reply Like
  • raykrv6a
    , contributor
    Comments (2780) | Send Message
     
    financeminister.

     

    I think the bad press on ARCP in the WSJ is going to hurt the stock price. I wonder why the WSJ focused on Nick, but it tells me that street probably has the same view and won't push ARCP like they should.

     

    So the real question is should ARCP dump Nick and go it alone. There might be more trust in the stock then.
    2 Jun, 06:04 PM Reply Like
  • Rudester
    , contributor
    Comments (2383) | Send Message
     
    "So the best way to say no is not actually voting "No" but abstaining."

     

    Horse puck! The message going back to the board and executives should be loud and unequivocal. No CEO and certainly not in the REIT space is worth that kind of dough.

     

    That's what's wrong with the corporate governance system. Look at what is happening at KO right now, a potential 13% dilution to the stock, which will force even more share buybacks at what will probably be the worse time. All board members should know how to spell the word "fiduciary".
    2 Jun, 06:11 PM Reply Like
  • WLDunst
    , contributor
    Comments (54) | Send Message
     
    I knew i should have bought O!
    2 Jun, 08:34 PM Reply Like
  • NickWang1981
    , contributor
    Comments (8) | Send Message
     
    if you hold a large position in ARCP, why you don't care about the stock price and dividend safety other than being on the board?

     

    How much do you need to invest in ARCP to be on its board? Tens of millions? You should definitely care more about the stock price and the dividend safety, that's your own money.
    2 Jun, 09:19 PM Reply Like
  • financeminister
    , contributor
    Comments (795) | Send Message
     
    Hey guys,

     

    Sorry for not being honest upfront but I was trying out a behavioral experiment and quoting most of the exact words of Warren Buffet on why he claimed that he was against, what he admitted were "excessive" compensation for Coke (KO) executives, but yet chose to abstain as a sign of disagreeing with them. He also had his son on the KO board.

     

    What struck me was that lots of folks on SA agreed with Warren's explanation, some even justified him and gave him a pass for publicly stating he disagrees with KO board but yet will not vote against their plan because, well, it's Warren the worlds greatest investor. I think that's dishonest on his part but I understand that what makes him a shrewd businessman also. So I thought I'll try the same thing but under my name and see if I could get a thumbs up.

     

    Well, as expected, I didn't get a thumbs up or a pass from a single commentator. Understandable.... because who would agree with such an outrageous compensation plan. But Buffett can get away with almost anything even if it's against most investors' principles.

     

    FYI, I'm just a small scale retail investor and started a small position (1.5% of DGI portfolio) in ARCP at 12.40 for my Roth IRA when it came crashing down at seemed to bottom in the 12.30s range. I don't have large position in ARCP, no access to the board and no children let alone a son in the board.
    2 Jun, 09:45 PM Reply Like
  • erixuss
    , contributor
    Comments (2) | Send Message
     
    Niiiice. I liked it!
    3 Jun, 03:36 AM Reply Like
  • PD329
    , contributor
    Comments (181) | Send Message
     
    Buffet's justification was that you can't vote against *everything* you disagree with because then your presence on the board becomes ineffective. Other board members come to view you as just a troublemaker. That doesn't mean he's never voted against things he disagrees with, and he has.

     

    Your comment, though phrased in Buffet's language, does not have the same track record behind it. For all we could tell from your comment, neither you nor your imaginary son had ever voted against anything you'd disagreed with. So it's not clear that you'd ever actually taken a stand against the board. That's quite different from Buffet.
    3 Jun, 09:15 AM Reply Like
  • mbn
    , contributor
    Comments (511) | Send Message
     
    financeminister;

     

    Seems like a very sneaky, underhanded way to conduct an experiment. I do not like it, unlike @erixuss.

     

    FYI - I voted against the KO board on their compensation plan also. Unlike Warren Buffet , who is to timid to express his opinions, if what you say about him is true.
    3 Jun, 09:19 AM Reply Like
  • Rhianni32
    , contributor
    Comments (2014) | Send Message
     
    To do a proper "expirement" you'd have to have the same people in both sample sets.
    I respect Warren but completely disagree with his opinion on KO.
    3 Jun, 09:49 AM Reply Like
  • alschroed
    , contributor
    Comments (1047) | Send Message
     
    You and your son should try to protect shareholders' money as Nick Schorsch and his cronies are trying to make themselves rich at our expense. The board is supposed to say no when the CEO gets out of hand. Bonuses should be tied to 3-5 year periods and should reflect share price increases and dividend increases; without the two there should be no bonuses.
    2 Jun, 04:37 PM Reply Like
  • financeminister
    , contributor
    Comments (795) | Send Message
     
    Hey alschroed,

     

    Please read my follow up above.

     

    Thanks,

     

    average retail investor
    2 Jun, 09:46 PM Reply Like
  • bbarnezz
    , contributor
    Comments (27) | Send Message
     
    Shareholders of all types should start to reject these ridiculous pay packages, and until executive compensation boards get taken to task and voted out for approving them, we should see increasing outrage against boards of directors, as well as the executives who siphon cash right out of the pockets of shareholders.

     

    These numbers are unjustifiable under any measurements. Executives should tie their compensation to the long term health and growth of the company, and we should join with other countries and get these numbers back into line.
    2 Jun, 04:44 PM Reply Like
  • Union Trade Assoc
    , contributor
    Comments (792) | Send Message
     
    Our 50,000 shares went to a No ! Vote. When Management produces proportional wealth for their Share Holders, we'll be pleased to compensate them on a most generous percentage based upon scale of success. Thus far, they are over-paid even on the bases of a dividend which is yet to be proven paid from earnings.
    You want it, Earn it ! - We think that compensation package takes Guts.
    2 Jun, 05:09 PM Reply Like
  • edmondgoh
    , contributor
    Comments (5) | Send Message
     
    you can always sell a share, no one forces you to hold them,, this is your true vote
    2 Jun, 05:46 PM Reply Like
  • edmondgoh
    , contributor
    Comments (5) | Send Message
     
    your true vote is to sell the share and dispose of the position, having said that they are taking the **** with the compensation package, which is 20% of rentals revenues a year roughly.
    2 Jun, 05:47 PM Reply Like
  • Rhianni32
    , contributor
    Comments (2014) | Send Message
     
    edmondgoh: thats not a true vote because management couldn't care if you sell it because someone else just bought it. Thats called walking away.
    I wish more investors remembered that shareholders are the owners and management works for us.
    2 Jun, 07:48 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (2188) | Send Message
     
    I'd like to offer them a new pay/incentive package. Management can take control of 1% of the company when its 52wk low exceeds a split adjusted share price of $24, and a further 9% of the company when it exceeds $72, all without any dividend cuts below today's level. To be generous, they can also have a take-home salary of up to $600k. If they work their asses off for a decade or so, they might find themselves owning 10% of a hundred billion+ entity, but even if they don't get there they'll be working hard to give us a clean double.

     

    Thoughts?

     

    I doubt they'd go for it.

     

    -Mike
    2 Jun, 05:36 PM Reply Like
  • PD329
    , contributor
    Comments (181) | Send Message
     
    The vote is advisory only, so now the interesting thing will be whether ARCP respects the wishes of its shareholders, or spits in our eye and goes ahead with it anyway.
    2 Jun, 07:10 PM Reply Like
  • boyd@simpsonorg.com
    , contributor
    Comments (6) | Send Message
     
    the package is excessive and should be reconsidered by the board. a reit is essentially a passive investment vechile. I have no doubt that management is making a meaningful contribution to the companie's success, but this is not an operating company. how many shares of the company do the managers own, purchased with their own capital ?
    2 Jun, 10:35 PM Reply Like
  • buylowsellhighonemoretime
    , contributor
    Comments (8) | Send Message
     
    they'll spit in our eye.
    2 Jun, 10:55 PM Reply Like
  • Rudester
    , contributor
    Comments (2383) | Send Message
     
    Over the past 4 years I have grown increasingly displeased with many boards. The so called "independent" directors are just too buddy buddy with the executives. As a result, I have started voting NO, on the re-election of any board member that has been on the board for more than 10 years, or who serves on two more boards, or is a current CEO of another company.

     

    I have come to believe that board members, like politicians, are like diapers. They should be changed often and for the same reasons.
    3 Jun, 10:30 AM Reply Like
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