Stockholders are mad as heck about skyrocketing executive pay, and they're not going to take it anymore. Empowered by Dodd-Frank to have their say-on-pay, Citigroup
The angst concerning executive pay is spilling over into the REIT sector, where pay and perk packages have been increasing to the point where they now represent twice the value gains of a given company's stock. The study that trained the spotlight on this issue notes that compensation packages since 2010 have increased by 48% for Michael Farrell, CEO of Annaly Capital Management
Next in line is mall REIT Simon Property Group
Though Annaly's return to investors was only 7%, Farrell's pay hasn't raised the ire of shareholders like it has over at Kilroy, where stockholders have, for the second time in a row, voted down the executive compensation package. The vote was a nay for Simon's remuneration, as well, amid concern over the millions thrown at Simon to keep him on board for the next eight years. Many investors didn't see the need, considering the family ties that bind the CEO to the company.
For Simon Group and Kilroy, shareholders seemed to feel that the compensation packages were overdone for the size of each company -- and, to a lesser extent, the level of performance. Investors in REITs may have other considerations, too. Since these entities are required by law to return 90% of net income to investors in order to avoid the taxation schedule of other corporations, excessive pay and perks for the big boys reduce the kitty from which the average investor's payout will be calculated.
For Annaly, the 17% annualized returns investors have been getting from the company since its 1997 IPO seem to be keeping shareholders sated, at least for now. Although management isn't paying a lot of attention to what shareholders think in regard to compensation packages, the floodgates have opened up, and what now may pass for venting will eventually become input that executives ignore at their peril. This applies especially to REITs, where the 90% rule necessarily means that there is never tons of money in the coffers. Stockholders represent an important way for these companies to raise needed capital, so playing fast and loose with investor's concerns is not a good business model. Investors have spoken; now all that remains is to see how long it takes for management to listen.
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