NEW YORK As the 2009 proxy season begins for the restaurant industry's publicly traded companies, observers say executive compensation is sure to be a top shareholder concern.
While the sums pocketed by restaurant company chiefs pale in comparison with eyebrow-raising figures being paid to titans in the financial industry, investors reeling from the market meltdown nonetheless are more closely scrutinizing company performance and compensation. The expectation is an increase in the number of "say on pay" proposals as well as turnover on compensation committees.
Investors across a variety of industries, including restaurants, are poised to use the 2009 proxy season as payback for the losses they booked as the market fell in 2008. Research from the Financial Times noted that only one stock mutual fund among 8,200 posted a profit last year, and that gain -- for the Forester Value Fund -- was limited to 0.4 percent.
Officials at the U.S. Securities and Exchange Commission also are discussing changes to executive compensation policies and transparency.
SEC chairman Mary Schapiro, who is only about 12 weeks into her job, told PBS last month that executive pay is a major concern for the agency.
"It's real important, especially given the crisis that we are going through right now, that boards be ever more accountable to the owners of the company, the shareholders," Schapiro said.
In the restaurant industry, watchdog groups and institutional investors have criticized executive compensation -- either the amount of pay or policies surrounding shareholder voting over compensation -- at such companies as Landry's Restaurants Inc., Yum! Brands Inc. and The Cheesecake Factory Inc.
At Louisville, Ky.-based Yum, a proposal that would allow shareholders an advisory vote on executive compensation is one of five shareholder proposals on the agenda for the company's 2009 annual meeting, which is set for May 21. It will be the third consecutive year that a "say on pay" proposal has been voted on at the company.
Last year, the proposal garnered 41.7 percent in favor. As in the past, Yum's board of directors has recommended that shareholders vote against such proposals.
"We do not believe that reducing the complex decisions that go into designing and administering a successful compensation program to a 'yes' or 'no' vote is an effective or efficient way to obtain shareholder input," Yum's proxy materials state.
According to Nation's Restaurant News research, total executive compensation rose in 2008 at six of the 10 largest restaurant companies, based on market capitalization. Only two of the 10 companies, however, posted increased stock prices for the same fiscal year.
At Burger King Holdings Inc., for example, chief executive John Chidsey received a 29-percent gain in total compensation in 2008, to $5.4 million, as Burger King's stock price declined 14 percent.
Darden Restaurants Inc. chief executive Clarence Otis saw his total compensation rise 31 percent in 2008, to $5.1 million, as the company's stock fell 22 percent.
Shareholder concern about such discrepancies is only likely to grow in the current economic climate, observers say.
"It was one of the hot-button issues, and it touched a lot more companies [in 2008]," Rajeev Kumar, senior managing director of research at Georgeson Inc., a proxy solicitor and advisory firm, told Nation's Restaurant News late last year, "and the expectation is that its scope will only grow."
Contact Sarah E. Lockyer at [email protected].
