CEO got a big pay raise in fiscal 2006; some shareholders want to have an influence on what the bosses make.
Schwartz's salary and bonus increased to $1.47 million in fiscal 2006, which ended June 30, from $1.09 million the year earlier, according to a Sun regulatory filing this week. In addition, Schwartz, who took over the CEO job in April from Chairman Scott McNealy, was granted restricted stock worth $12.97 million and 2.9 million stock options that vest over a period of years.
After years of struggling, Sun has restored some of its financial health, making gains in the server market in the second quarter and posting revenue that outpaced Wall Street expectations. Thousands of employees have lost their jobs at the Santa Clara, Calif.-based company along the way.
Now two shareholders want to have a say in how Sun compensates its executives. The American Federation of State, County and Municipal Employees Pension Plan and the Connecticut Retirement Plans and Trust Funds have proposed a measure that shareholders be permitted to vote, though only in an advisory capacity, to approve the board's compensation committee reports. Shareholders will vote on the measure Nov. 2 at the company's annual shareholder meeting.
The two shareholders cited McNealy as an example.
"In our view, senior executive compensation at Sun has been excessive in recent years. In 2005, Chairman and then-CEO Scott McNealy received $1,233,039 in salary and bonus of 1,250,000 options, and exercised 4,800,000 stock options for $11,841,600 in value realized. At the same time, Sun was selected to the 2005 Focus List of underperforming companies by the Council of Institutional Investors," according to the proposal. "We believe that the current rules governing senior executive compensation do not give stockholders enough influence over pay practices."
Sun's board advised that stockholders vote against the measure. "The Leadership Development and Compensation Committee...believes that the current structure is appropriately balanced and competitive to accomplish the crucial task of recruiting, retaining and motivating talented senior executives in the highly competitive technology industry in which Sun competes," the board said in the filing.