Despite a significant minority of 34% voting against the set-out policies, the Caterpillar Inc. (NYSE:CAT). The company’s executive compensation plan still took the win. This is after the Company’s Shareholders approval that was supported by a 66% of a non-binding vote that supported the compensation scheme.
Apparently, shareholders had called on various groups to vote against Caterpillar’s compensation policies. The groups included Lewis & Co, Proxy advisers Glass as well as Institutional Shareholder Services Inc alongside CtW.
While CtW sharply criticized the bonus compensated to Caterpillar Chief Executive Doug Oberhelman, CAT was on point to shield its pay policies. Caterpillar Inc. (NYSE:CAT) explained that its executives deserved raises and that it had linked compensation to performance.
Earlier in 2014, the target for operating profit that was mainly used for defining short-term incentive payments was reduced. However, even after this move CAT still managed to exceed the target. This was partially what resulted in Mr. Oberhelman’s increased compensation from 14% to $17.13 million.
Cost management, operational execution, and cash flow were among the areas of operation that Caterpillar had laid out more emphasis on. As a result of this emphasis, the earnings were boosted to $5.88 per share from $5.75 a year earlier.
However, CtW still seemed to be in disagreement. They argued that the improved earnings per share had affected the number of shares. CtW had mainly criticized the switch to earning per share from total shareholder returns. From the investor’s point of view, earnings per share would be a challenging measure of compensation.
Nevertheless, Caterpillar Inc. (NYSE:CAT) thinks otherwise. According to them, the change would provide a platform of more focus on profitability.
Another concern by Institutional Shareholder Services, a Rockville, a Md.-based advisory firm is that the increased Oberhelman’s compensation had come at a time when the returns were lagging behind. On the other hand, Glass Lewis criticized the process used by Caterpillar in determining bonuses. According to Lewis, the process was unclear, ineffective and probably misleading.
