We expressed compensation-related concerns over several years to leaders of Alphabet, a multinational technology conglomerate and parent company of Google. That topic remained prominent in our most recent engagement, when we discussed Alphabet’s 2020 Say on Pay proposal.
This is the third straight year the Vanguard funds have voted against the company’s Say on Pay proposal. Alphabet awarded a large compensation package to its new CEO, who took on the role in late 2019. In our discussion, company executives shared that the board’s support of the pay package signaled their confidence in the CEO as the best candidate to lead the company.
We did not, however, gain any more comfort about the magnitude and structure of the equity plan awarded to the CEO. Vanguard believes that compensation policies that are long-term-focused and tied to a relative performance metric can help to incentivize long-term shareholder value creation. In evaluating the plan, we found a misalignment between pay and performance. We also would have liked to see a greater portion of compensation in the long-term plan tied to company performance with links to a more rigorous metric, such as relative total shareholder return.
As this was the third year the Vanguard funds voted against the proposal, they also withheld support from the chair of the compensation committee. Through our engagement and voting activity, we will continue to voice our expectations that executive compensation be aligned to long-term shareholder value.