A Third of Caterpillar Investors Reject Executive Pay Plan

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Why Caterpillar Is Facing Shareholder Discontent

Caterpillar Inc. shareholders approved an advisory vote on executive compensation, with a third voting against the plan signaling some dissatisfaction with management’s performance.

Preliminary voting results indicate 66 percent of stockholders of the world’s largest maker of mining and construction equipment approved the proposal, Rachel Potts, a spokeswoman for the Peoria, Illinois-based company, said in an e-mail Wednesday. Last year, Caterpillar’s executive compensation proposal received 96 percent approval, Potts said.

“We will continue to maintain a dialogue with our stockholders with regard to issues that are of interest and/or concern to them,” Edward Rust, presiding director of the Caterpillar board, said in an e-mailed statement.

Caterpillar’s sales have dropped about $10 billion in the last two years as demand for its signature yellow equipment declined after mining activity slowed and oil prices tumbled. Sales are expected to fall again this year and profit per share will drop 22 percent, according to the average of 13 analysts’ estimates surveyed by Bloomberg.

Meanwhile, Caterpillar Chairman and Chief Executive Officer Doug Oberhelman’s reported pay has climbed 14 percent to $17.1 million in 2014, according to data compiled by Bloomberg. Over the past 12 months, the stock has tumbled 19 percent. Shares rose 2 percent to $88.48 at the close in New York.

‘Shareholder Discontent’

The company is facing “shareholder discontent” over a widening gap between its waning stock price and Oberhelman’s compensation, according to CtW Investment Group, which was pushing for investors to reject the pay proposal. The group had criticized the company’s shift to connecting compensation to earnings per share, which it argues can be affected by share buybacks.

In January 2014, Caterpillar’s board approved a share repurchase plan for as much as $10 billion. Through the end of the first quarter of this year, $2.9 billion has been spent, according to a securities filing.

“Caterpillar has a rebuilding project of its own: executive pay needs overhauling and its credibility with long-term investors re-constructed,” Dieter Waizenegger, executive director of CtW Investment Group, said in an e-mailed statement Wednesday.

The board today also approved increasing the quarterly cash dividend 10 percent to 77 cents a share.

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