Rite Aid shareholders defeated the company's say-on-pay proposal at its annual meeting Tuesday, demonstrating their disapproval with executive compensation in the 2018 fiscal year, which ended in March.
At the meeting, Bruce G. Bodaken was appointed chairman effective immediately, replacing John T. Standley, who will remain CEO and a member of the board of directors. Stockholders also voted in favor of all of the company's nominees to the board.
Leading up to the say-on-pay proposal vote, the International Brotherhood of Teamsters was vocal in its opposition, while the two largest proxy advisory firms, Institutional Shareholder Services and Glass Lewis, also came out against it.
In a news release Tuesday, Rite Aid referred to the proposal as a "non-binding advisory resolution on executive compensation."
After the $24 billion merger between Rite Aid Corp. and Albertsons Cos. was called off in August following investor pushback, Rite Aid CEO Mr. Standley received a $3 million retention payment.
In a statement Tuesday, Teamsters General Secretary Ken Hall said that payment was a "startling lack of accountability and executive enrichment" that not only exposes "a cultural void at the top, but also erodes morale among rank-and-file employees."
Mr. Hall said it's now clear Mr. Standley needs to rebuild trust among Rite Aid investors and workers alike.
In its proxy statement prior to the meeting, Rite Aid said its primary compensation goals for named executive officers are to "attract, motivate and retain the most talented and dedicated executives" and to align executives' interests "with the interests of our stockholders." Additionally, the company's compensation programs are designed to reward the executives "for the achievement of annual and long-term strategic and operational goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking," the proxy statement said.
ISS took issue with Rite Aid lowering the threshold performance goals for annual incentive awards midyear, "resulting in payouts that otherwise would not have been earned, and CEO pay increased despite declining stock price performance," the firm said in a research report released earlier this month.