Bermuda-based Nabors Industries Ltd. held its annual meeting on Tuesday and shareholders demonstrated a remarkable amount of dissatisfaction with compensation policy. Not only that, but they are also looking for an increased ability to remove underperforming directors and nominate their own candidates. Check out these vote tallies (excluding non-votes and abstentions), starting with the board.
Management Proposal to Declassify the Board
Result: 95% “For” votes, 5% “Against”
Shareholder Proposal for a Proxy Access By-law
Result: 56% “For” votes, 44% “Against”
Clearly, nearly all shareholders are in favor of board declassification with more than a majority looking for direct access to the proxy to nominate directors. Of course, shareholders also voted on a number of compensation issues:
Management Proposal for Approval of 2012 Incentive Bonus Plan
Result: 48% “For” votes, 52% “Against”
Management Proposal for Approval of 2012 Stock Plan
Result: 45% “For” votes, 55% “Against”
Shareholder Proposal to Amend By-laws Seeking Shareholder Approval of Future Severance Agreements
Result: 66% “For” votes, 34% “Against”
Advisory Vote on Compensation of Named Executive Officers
Result: 25% “For” votes, 75% “Against”
Twenty-five percent in favor of pay plans! This has to be the most powerful statement made by shareholders so far this proxy season. You may remember that Nabors failed Say on Pay last year as well. We took them to task at the time for policy flaws when the company managed just 42% support on advisory pay plans. Indeed, that post was just one of five Nabors posts in the last year on the GMI blog. There was this post in October 2011, regarding the potential $100 million payday for Eugene Isenberg for switching his title. Then there were two more in November 2011; the first was on the SEC investigation of perks at Nabors followed by this post when the Wall Street Journal revealed FAA flight records regarding frequent trips to Palm Beach and Martha’s Vineyard, places of residence for the CEO. We even had one positive post about Nabors in February 2012 when Mr. Isenberg decided to forfeit his potential severance payment. However, one gesture does not a sound compensation policy make.
In truth, these votes are not all surprising. Shareholders have been attempting to declassify the board for years and shareholder sponsored proposals opposing aspects of executive pay have been gaining traction since at least 2008. The board has failed to address, among other things, succession planning concerns, large bonuses based on outdated cash flow metrics, excessive perks, and high dilution rates born out of large equity grants to executives. If the message wasn’t received before, it certainly has been now. Nabors shareholders want immediate improvements made to compensation policy. And they want the ability to nominate directors who will act in their best interests.
Due to concerns about compensation as well as other red flags, GMI gives Nabors an F on its corporate governance overall. The company’s financial statements reflect an AGR score of 68, indicating higher risk than 32% of companies.
By Greg Ruel – Senior Research Associate
Region: North America
Industry: Oil / Gas Drilling
Market Cap: $ 4,012.0mm (Mid Cap)
ESG Rating: F
AGR: Average (68)