By James R. Hagerty
ISS Proxy Advisory Services on Tuesday recommended shareholders
reject the executive compensation policies at Caterpillar Inc. in
an advisory vote at the annual meeting June 10.
The Rockville, Md., advisory firm also urged Caterpillar
shareholders to vote against the re-election of one of the
construction equipment maker's directors, Juan Gallardo, at the
annual meeting.
ISS noted the compensation of Caterpillar's chief executive,
Douglas Oberhelman, "increased during a period of lagging returns."
Mr. Oberhelman's total compensation rose 14% to $17.13 million last
year.
ISS added: "The maximum performance goal was attained for the
annual incentive award when goals had been lowered significantly
from 2013 targets...and despite only marginal increases in the
company's profitability."
A Caterpillar spokeswoman declined to comment on the ISS
report.
In its May 2 proxy letter to shareholders, Caterpillar said an
"emphasis on cost management, operational execution and cash flow"
helped increase earnings last year to $5.88 a share, from $5.75 a
year earlier. But 2014 profit declined 2.5% to $3.70 billion.
CtW Investment Group, an arm of the U.S. union federation Change
to Win, said earlier this month that it would urge shareholders of
Caterpillar to reject the compensation policies
Among other things, CtW noted the improved earnings per share
reflected stock repurchases that reduced the number of shares
outstanding. Caterpillar spent $4.2 billion on share repurchases in
2014, up from $2 billion in 2013.
Meanwhile, ISS argued that Mr. Gallardo is overcommitted because
he serves on boards of more than three other companies. Mr.
Gallardo, a director of Caterpillar since 1998, is chairman of
Organizacion Cultiba, S.A.B. de C.V, which controls one of Mexico's
biggest soft-drink bottlers. He also serves on the boards of
Lafarge SA and Grupo Financiero Santander S.A.B. de C.V.
Mr. Gallardo couldn't immediately be reached for comment.
Caterpillar said in its recent proxy filing that Mr. Gallardo's
international business experience, notably in Latin America, is
"important for the company's growth strategy."
Write to James R. Hagerty at bob.hagerty@wsj.com
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