PeopleSoft Links Pay and Performance
Responding to shareholder pressure,
PeopleSoft
(PSFT)
has agreed to link 50% of its top executives' stock pay next year to performance targets and will replace options awards for executives with restricted stock.
According to a filing with the
Securities and Exchange Commission
on Thursday, the compensation committee of PeopleSoft's board of directors is developing a policy that will tie vesting of 50% of stock awards for the CEO and the four other highest-paid executives to performance metrics.
PeopleSoft, which has faced mounting
criticism for its compensation practices, said the policy shift came after consultation with a stockholder, but it did not name that stockholder.
Previously, the California Public Employees' Retirement System (CalPers), the nation's largest pension fund, with $154 billion in assets, submitted a performance-based equity compensation program to be voted on by shareholders at the company's annual meeting next month. A CalPers spokesman told
Dow Jones
that the fund met with PeopleSoft's compensation committee, which was willing to accept some of CalPers' proposals.
Since then, CalPers has dropped its proposal, though it went a little further than the company by calling for 75% of equity compensation to be based on performance.
PeopleSoft's current pay-performance practices received a D grade from San Francisco-based Glass Lewis. The proxy advisory firm found that PeopleSoft pays its executives more than 96% of the companies in three peer groups of 100 companies each, while PeopleSoft's stock performance has been just a little above average vs. those peers.
To measure company performance, Glass Lewis looks at such metrics as earnings-per-share growth and stock performance.
Following a trend set by
Microsoft
(MSFT) - Get Report
, PeopleSoft also said in the filing Thursday that equity awards to executives in 2004 will be solely in the form of restricted stock "to further align the long-term interests for our stockholders and executives." The company also noted restricted stock is
less dilutive than pure options awards.
PeopleSoft took other steps to reduce the number and size of equity grants to new and current employees. The moves to reduce employee stock options may come in response to increasing pressure on tech companies to expense options and to the likelihood of companies eventually being required to take that step.
With expensing options a policy priority this year, the AFSCME Employees Pension Plan and Connecticut Retirement Plans and Trust Funds have submitted a proposal on PeopleSoft's proxy urging the board of directors to recognize the cost of stock options on the company's income statement. The PeopleSoft board has opposed that proposal, which also comes before shareholders at the company's annual meeting next month.
PeopleSoft also decided not to give its executives a raise in 2004. But the bulk of CEO Craig Conway's compensation didn't come from his base salary in 2003. Conway, who has been fighting a hostile takeover bid from rival
Oracle
(ORCL) - Get Report
and has a
generous golden parachute if PeopleSoft is acquired, received a bonus totaling $2.3 million last year, plus 1.5 million options. All told, Conway holds more than 4.5 million PeopleSoft stock options.
Shares of PeopleSoft were recently off 2 cents, or 0.1%, to $22.13 after closing down 45 cents, or 2%, at $22.15 in Thursday's regular session.