ISS Urges Conagra Shareholders to Reject Executive Pay Plan, Citing Performance Disconnect

Institutional Shareholder Services (ISS) has advised Conagra Brands shareholders to vote against the company's proposed executive compensation program, raising significant concerns about a disconnect between executive pay and declining financial performance.

The influential proxy advisory firm's recommendation comes ahead of the packaged food maker's annual general meeting, scheduled for September 23.

Key Concerns from ISS

In its report, ISS highlighted several issues with the proposed pay structure for new CEO John Brase. The firm's primary objections centered on a perceived pay-for-performance misalignment.

Key points raised by ISS include:

• Rising Pay, Falling Performance: The firm noted that CEO compensation increased even as the company's financial results weakened during the year under review.
• Lowered Targets: For the second consecutive year, short-term incentive goals were set significantly below the previous year's actual achievements, with what ISS called "no clear rationale disclosed."
• Insulating Executives: ISS criticized a substantial increase in the number of shares underlying the CEO's long-term incentive award, which resulted from the company's falling stock price. The firm stated this practice could insulate executives from poor stock performance.

Company Performance and Pay Details

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The recommendation follows a challenging period for Conagra, owner of brands like Hunt's and Slim Jim. The company halved its annual dividend in July and issued a weak profit outlook, prompting a review of its non-core assets under its new CEO.

According to an August 11 proxy statement, the proposed compensation for CEO John Brase includes a $1.15 million base salary and $7.3 million in annual long-term incentives. In the same filing, Conagra's human resources committee chair, John Mulligan, stated that approximately 90% of the CEO's total direct compensation is tied to company performance and long-term shareholder value.

Implications for Investors

ISS recommendations carry significant weight, particularly with institutional investors who often follow the adviser's guidance on corporate governance matters. Conagra shareholders have a history of rejecting executive pay packages in recent years, a fact the company acknowledged in its proxy statement, where it highlighted shareholder engagement as a priority.

The vote at the upcoming meeting is advisory, but a significant vote against the plan would send a strong message of shareholder dissatisfaction to the board. Conagra did not immediately respond to a request for comment, according to Reuters.