Shareholder activists suffered a defeat on two fronts. They had sought to prevent the expansion of Cisco's controversial stock compensation plan, and to push through an initiative aimed at capping executive pay. But shareholders, no doubt buoyed by this year's run-up in Cisco's beaten-down stock, turned back both proposals by wide margins.
Some 93% of shareholders voted to add 100 million shares to Cisco's employee stock purchase plan. The new arrangement also will extend the program to 2010. On top of that, 91% of shareholders voted down an initiative to force the board to report on the disparity between CEO pay and the lowest salaries at Cisco.
Critics of Cisco's stock compensation practices have argued that the computer networking giant
funnels too much of its abundant cash flow to employees and executives via stock and option compensation, at the expense of outside investors.
Some 321 million shares have been issued already for Cisco's employee stock plan, which offers qualified workers a 15% discount on share purchases. One of the biggest defenders of stock compensation, and notably one of the biggest beneficiaries, has Cisco chief John Chambers, who owns and holds options 30 million shares. In fact, in lieu of salary, Chambers has taken options on 10 million shares for the past two years.
Addressing the shareholders Tuesday, Chambers said Cisco had the most generous stock compensation program he knew of and that shares are spread broadly among all employees, not just concentrated among executives.
"Stock options are a shot for employees at the American dream," says Chambers.
Chambers also repeated some of his observations about a nascent recovery afoot in technology spending. He said he felt a growing confidence among businesses "on a global basis." And as he
said last week, half the business leaders he's talked to feel "wind at their backs," while the other half is waiting to see more evidence of the so-called recovery.
In other votes, shareholders approved by 96% the election of all the directors nominated to the board. They rejected by 97% a proposal that would require Cisco to disclose the products that can be used by governments and organizations to stifle freedom of information. And new auditors PriceCooperWaterhouse were approved by 93%.
On Tuesday, Cisco rose 17 cents to $22.36. The stock has nearly doubled in the last year as tech stocks have rallied amid hopes of an economic bounceback. Even so, Cisco shares have lost nearly three-quarters of their Internet boom-era peak value.