Alphabet set to face down shareholder dissent

Google’s parent company Alphabet is set to face smouldering shareholder unhappiness over corporate governance at its annual meeting on Wednesday.

Three of the most influential advisers to large investors – ISS, Glass Lewis and Pirc – have recommended shareholders oppose the company's board on a number of issues, including last year's $200 million pay package for Google chief executive Sundar Pichai.

The advisory firms are also backing calls for more disclosure about how much Alphabet spends on political lobbying and whether Google pays female employees fairly – an issue that hit the headlines earlier this year following criticism from the US Department of Labor.

In the wake of significant protest votes at last year’s meeting, there is “widespread dissatisfaction with aspects of the company’s general corporate governance, voting structure and equity plans”, said Glass Lewis.

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Google has strongly denied the claims about pay discrimination, and Alphabet rejected the shareholder proposals for this week’s meeting, arguing that it already went well beyond legal disclosure requirements.

Governance

Alphabet has drawn protests from shareholder governance experts since its 2004 IPO set the trend among tech companies to concentrate power in the hands of founders. The complaints deepened after it issued a new class of shares in 2015 with no voting rights - an idea since copied by Facebook and Snap.

Google founders Larry Page and Sergey Brin together control nearly 51 per cent of the company's voting power. They defended the concentration of power at the time of the IPO as a way to give them the ability to focus on the long term rather than react to short-term stock market pressures.

A majority of the shareholders who are unaffiliated with the company last year voted against the employee stock plan and called for an end to the skewed voting structure, though their opposition was swamped by insiders.

This year’s complaints include the pay of senior executives, with all three proxy voting agencies recommending shareholders vote against Alphabet’s compensation plan because of concerns about “excessive” stock awards and the lack of performance-related measures.

Mr Pichai was paid $200 million in 2016, the bulk of which came in the form of shares in the company, and received $100 million the year before.

Alphabet has also come under pressure from a US asset manager and a convent in Baltimore to reveal more information about its political lobbying activity. Walden Asset Management and the Benedictine Sisters of Baltimore are among 20 shareholders who have signed a proposal calling on the technology giant to provide an annual breakdown of its efforts to influence legislation.

In particular they have called on the company to disclose more detail about how much it spends indirectly through payments to trade groups and organisations.

The shareholder filing states that Alphabet spent approximately $80 million on federal lobbying between 2010 and 2015, although this figure excludes expenditure on lobbying at state level, through trade associations and overseas.

Alphabet has recommended shareholders reject the proposal as its website “already contains much of the information requested”.

- (Copyright The Financial Times Limited 2017)