About one-quarter of votes cast by Hudson's Bay Co. shareholders opposed the company's multi-million dollar payouts to top executives for the second year in a row at an unusually secretive annual general meeting on Wednesday.
Nearly 26.5 per cent of votes cast were against the retailer's approach to executive compensation, according to company documents. That amounts to about 47.9 million negative votes.
"We are concerned that the board has again chosen to make awards to executives that are outside the compensation plan," wrote the Ontario Teachers' Pension Plan, which holds a 10 per cent stake in HBC, in its rationale for voting against the proposal.
"We do not feel that the awards have been sufficiently justified."
Most say-on-pay motions, such as this one, receive more than 90 per cent of shareholder approval, said Richard Powers, an associate professor at the University of Toronto's Rotman School of Management.
The large number of dissenting votes is the equivalent of shareholders throwing up their hands in frustration, he said.
The company's highest paid executive, CEO Helena Foulkes, received a pay package of a little over $29.4 million for the 2018 financial year — her first with the company. Foulkes, who joined HBC in Feb. 2018, received a package that includes a roughly $1.6-million base salary and about $19.6 million in share-based awards and a roughly $3 million sign-on bonus. It also included a pension, a roughly $2.7-million guaranteed annual bonus, a housing and relocation allowance, and other compensation.
The practice is called a golden handshake, said Kai Li, a professor at the University of British Columbia's Sauder School of Business. It's an example of a deeply troubled company trying to attract a strong candidate.
"They're just throwing extra goodies to draw her here," she said, calling it bad policy.
HBC's other five highest paid executives received total compensation between about $1.8 million and $3.1 million.
HBC's executive compensation program was designed to incentivize, retain and attract top executives, according to documents. Its program "is generally consistent with retail industry market practices."
The non-binding vote on its approach to compensation for these executives is "fair, competitive and linked to performance" in the view of the board of directors, according to documents. The vote is intended to provide shareholders with "an opportunity to express their views" and "provide valuable input" to the board on this issue.
According to the documents, the board "will take the results of this vote into account when it considers future compensation policies and issues."
However, this is not the first issue to encounter resistance. At HBC's 2018 meeting, 27.17 per cent or about 43.4 million votes cast were against Richard Baker's $54.9 million in total 2017 compensation.
That dissent came from the company's golden parachute for Baker, who served as interim CEO from Nov. 2017 until Foulkes stepped into the top position.
A big payout to an outgoing executive allows them to land comfortably, but the reward to an executive that oversaw the company during continued weak sales and sizable losses likely outraged some shareholders, said Li.
The large number of votes against the company's executive compensation practices is a new development from 2017 when only 1.47 per cent of votes went against the policy. In the 2016 financial year, top executives received total compensation between roughly $2.1 million and $7.8 million.
The non-binding resolution comes amid a proposal by a group of shareholders that includes now executive chairman Baker to take the company private.
The group's offer earlier this month of $9.45 per share in cash to other investors was panned by activist investor Land and Buildings Investment Management, which called it "woefully inadequate."
HBC held the vote away from media as it barred reporters from its annual general meeting Wednesday and did not stream the proceedings via webcast. The moves signalled a departure from previous years, according to archived webcasts on its website.
"It all comes down to transparency and accountability," said Powers, adding the decision likely came as a result of recent negative media coverage of the retailer.
"They're not only thumbing their nose at the general shareholders, but they're also thumbing their nose at the people who usually cover the company."
HBC likely knew the results of the vote would receive news coverage, he said, but decided not to make it easy for the media.
HBC did not immediately respond to a request for comment on the results of the vote or why it decided to ban media from the event.
Other companies have also recently made their previously public annual general meetings accessible only to shareholders.
Lululemon Athletica Inc. did not webcast its annual general meeting this year, and reporters from The Canadian Press have previously been prevented from attending the meetings of DHX Media Ltd., Crescent Point Energy, The Stars Group (formerly Amaya Inc.) and Resolute Forest Prodcuts in recent years.
Li notes all of these companies have one thing in common: they're Canadian.
"Canada is not known to have the highest corporate governance practice," she said, citing a lack of sophisticated institutional investors and a lack of media scrutiny as part of the problem.
"They are doing things not up to standard."
Companies in this story: (TSX:HBC) (TSX:DHX) (TSX:RFP) (TSX:CPG) (TSX:TSGI)
Note to readers: This is a corrected story. A previous version stated that a reporter from The Canadian Press was barred from a Shaw Communications Inc. AGM this year.