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Say on pay

Pension funds line up against IBM executive compensation, support proxy access

Several large pension funds and proxy advisory firm Institutional Shareholder Services are against ratifying the compensation of Virginia Rometty, CEO of International Business Machines Corp., and four other top executives.

Ms. Rometty's total pay rose to $50.9 million in fiscal year 2017, up from $20.8 million in fiscal year 2016, according to a report last month from ISS. The pay of the four other executives named in the management proposal ranged from $7.3 million to $9 million in fiscal year 2016.

In the same report, ISS recommended shareholders vote against ratifying the executives' pay, stating: “In addition to routine pay, the CEO received a sizeable premium-priced option award, the design of which does not appear particularly rigorous. Also, the lack of disclosed short- and long-term incentive program goals is concerning, particularly in light of the high level of CEO pay.”

The $202.1 billion California State Teachers' Retirement System, West Sacramento; C$175.6 billion ($131.7 billion) Ontario Teachers' Pension Plan, Toronto; Canada Pension Plan Investment Board, Toronto; $133.2 billion Texas Teacher Retirement System, Austin; and the Florida State Board of Administration, Tallahassee, will all vote against ratifying Ms. Rometty and the four other named executives' compensation, according to their proxy-voting disclosures. All five entities also indicated that they are voting in favor of a proxy access proposal at IBM.

The Canada Pension Plan Investment Board manages assets of the C$287.3 billion Canada Pension Plan, Ottawa. The Florida State Board of Administration oversees a total of $186.2 billion in assets, including the $146.1 billion Florida Retirement System.

“As explained in detail in the proxy, the compensation decisions reflect the board's strong confidence in the leadership of the company and in the momentum of its strategic direction at a critical time in the technology industry,” said an IBM spokesman in an email Monday. “The one-time grant of a premium-priced option reflects the significance of this unique moment in the industry, and was discussed at length in last year's proxy as well. The shares do not vest until 2019, and the premium pricing ensures that IBM's shareholders benefit first before any payout is made.”

IBM's annual meeting is Tuesday.