SANTA CLARA, Calif. -- A day after
ousted the nation's incumbent political party,
was rocked by another vote.
At the company's annual shareholder meeting Wednesday, two-thirds of Sun shareholders demanded a greater voice in setting pay packages for the company's top brass.
The 67% vote of shares in favor of the so-called "say on pay" proposal marked the highest level of support for such a measure at a large-cap company, according to the measure's sponsor, and underscored the dissatisfaction and loss of patience among Sun shareholders.
"We've reached a tipping point in the outrage toward extraordinary
unrelated to performance," said Rich Ferlauto, of the American Federation of State, County and Municipal Employee Pension Plans, which helped sponsor the measure.
The Santa Clara, Calif., computer maker has struggled to turn a profit for years, even as competitors such as
have thrived. Last week, Sun posted a $1.7 billion loss for its
that included a writedown of all the goodwill value associated with its computer systems business.
Sun's stock, which slipped 31 cents to $4.62 Wednesday, is trading at its lowest level in more than 10 years and is down 76% since the company implemented a reverse stock split last November that boosted the share price to around $20.
A slew of investors gathered in Sun's corporate auditorium took turns at a microphone Wednesday to vent their frustration with the company, its management and its board: How can the company justify bonuses paid to any of Sun's executives? Why is Sun failing while its rivals continue to increase their revenue? What does the company's management have to say about the failed reverse stock split?
Chief Executive Jonathan Schwartz stood uncomfortably on stage and defended the company's performance, while a Sun director chimed in that the board believes its pay-for-performance-based executive compensation practice is effective.
"Jonathan, along with much of the team, has suffered from the performance of the stock," noted director Stephen Bennett, who sits on the Sun compensation committee. While Schwartz received a bonus in the first and second fiscal quarters of the year, he did not receive any bonus in the third or fourth quarter, Bennett said.
According to Sun's proxy statement, Schwartz took home $7.7 million in compensation in the 2008 fiscal year, including base salary, stock options and bonuses.
At one point during the event, a handful of Sun "heavies" surrounded a man recounting a strange tale of getting fired from Sun for suspicion of terrorism and duly escorted him out of the building.
Investor ire about Sun's performance and its compensation was not so easily carted off, though.
The passage of the say-on-pay proposal follows unsuccessful attempts to pass the proposal in 2006 and 2007. The proposal's passage also comes as Southeastern Asset Management has built up a 21% stake in Sun and re-classified itself as an "active" Sun shareholder in regulatory filings.
A spokesperson for Southeastern Asset Management could not immediately be reached for comment regarding the say-on-pay proposal.
The measure calls for Sun to give shareholders the right to voice their approval or disapproval of executive pay packages at Sun every year, though the investor feedback would be advisory rather than binding.
In fact, Sun isn't even obligated to implement Wednesday's say-on-pay proposal, despite the overwhelming support for it, as the proposal itself was non-binding.
A Sun spokesperson said the company's board would take it under advisement.
AFSCME's Ferlauto said his organization would be in contact with Sun about implementing the measure, and said he expected it to be implemented within a year. Otherwise, he said, the organization might turn up the heat.
"If Sun Microsystems decided they were going to ignore the wishes of two-thirds of their shareholders, it would be very likely that we would seek to oust those directors," said Ferlauto.