Constellation Energy Group shareholders registered their opposition Friday to the pay package of Chief Executive Officer Mayo A. Shattuck III, sending a strong message of disapproval to the company's leadership after a year in which it lost nearly $1 billion.
The Baltimore Gas & Electric Co. parent's board of directors is not bound by the result of the shareholders' first-ever "say on pay" vote; the board approved the compensation package for Shattuck and other senior executives earlier this year.
But it amounted to a symbolic blow to Constellation, which has come under criticism in recent years for its pay practices.
In a year when shareholders at most U.S. companies are getting their first opportunity to cast advisory votes on compensation plans, most pay packages are winning support. Investors of McCormick & Co. and Under Armour have approved millions of dollars in pay for CEOs Alan D. Wilson and Kevin Plank.
Constellation investors holding 61 percent of the 156 million shares casting votes at the company's annual meeting Friday opposed the company's compensation plan.
The French utility EDF, Constellation's largest investor, voted no with its 7 percent stake. Two influential shareholder groups had advised others to do the same.
Some shareholders challenged Shattuck's management of the company through a decade of ups and downs, several merger attempts and a near bankruptcy in 2008. He brokered the sale of the company to Chicago-based Exelon Corp., a deal worth $7.9 billion.
Former state Sen. Julian L. Lapides, a 40-year Constellation stockholder, told Shattuck it was "unconscionable" for the company to award such large salaries when its stock lost more than 60 percent of its value in the past several years. Lapides suggested that Constellation executive pay should have been cut by the same percentage.
"I'm disappointed in the company and the management, and extremely disappointed in the compensation awarded to the black suits," said Lapides, who said he was attending his first annual meeting. "The public's perception is you all are getting windfalls."
Lapides also questioned whether the board "serves as a rubber stamp to the management."
Shattuck's total compensation last year was valued at $15.7 million, according to regulatory filings, up from $10.9 million in 2009. Much of the year-over-year increase came from changes in the accounting value of his pension and deferred earnings. Excluding that accounting change of $4.9 million, Shattuck was paid $10.8 million in base salary, cash incentive, stocks, options and perks.
Constellation posted a loss of $982.6 million last year, due in part to the reduced value of its nuclear power business. The company reported a profit of $4.4 billion in 2009.
Shattuck said he expected "some angst" over executive compensation. He defended the board's independence.
"Despite what you read, we have a very performance-based plan," Shattuck said in response to Lapides.
One shareholder who supported Shattuck told him, "You're the right man at the right place at the right time."
Shattuck received last year a base salary and cash incentive payment of $3 million. Constellation says payouts of his stocks and options are not guaranteed. Officials say 87 percent of Shattuck's compensation is based on meeting performance goals.
A company spokesman said the package is "fully aligned with shareholder interest."
Asked how the board might respond to the shareholders' disapproval, spokesman Lawrence McDonnell said it "looks at compensation on an ongoing basis and will continue to do so."
Executive pay in corporate America is on the rise again after declining in 2008 and 2009.
Total CEO compensation at S&P 500 companies rose 28.2 percent in 2010, according to consulting firm Equilar. Median CEO pay is now $9 million.
In most cases where compensation packages did not win shareholder support, analyst Carol Bowie said, investors were swayed by "prolonged poor performance and unjustified high CEO pay."
Even some companies with positive performance did not garner enough votes for their executive compensation if pay was perceived to be out of line, said Bowie, head of compensation policy development at ISS, one of the firms that advised Constellation shareholders to vote against Shattuck's pay.
The 25 other large companies that have failed to win support for executive pay practices represent less than 2 percent of firms that have held "say on pay" votes this year, according to ISS.
In recommending that Constellation investors oppose the company's compensation package, ISS and Glass, Lewis & Co. said the pay was out of line with performance last year. ISS said a $100 investment in Constellation at the end of 2006 had fallen in value to $50.80 last year.
"In most cases, [shareholders] are focused on companies that haven't delivered performance but don't seem to be reflected in executive pay," Bowie said.
Gov. Martin O'Malley and some lawmakers have quarreled with Constellation over executive pay.
O'Malley went after Shattuck's golden parachute package two years ago as Constellation sought regulatory approval to sell half of its nuclear power plants to EDF.
In response, Constellation no longer provides severance or a "change in control" payout that would be triggered by the company's sale, as in the Exelon merger. But Shattuck still is eligible for $20.6 million in previously owed incentive payments upon the merger's completion, according to regulatory filings.
State Sen. James C. Rosapepe, a critic of Constellation's executive compensation policies, described the vote Friday as a warning to the company's new owner.
"When a major shareholder like EDF is saying that compensation packages at Constellation have been inefficient and counterproductive, that sends a message to Exelon as well," the Prince George's County Democrat said.
Exelon declined to comment Friday.
Outside Constellation's headquarters on Pratt Street on Friday, a coalition of labor and other groups handed out fliers asking shareholders to "just say no to Mayo."
Monica Jones, who delivered a message to Shattuck at the meeting on behalf of Good Jobs, Better Baltimore, said she was pleased that shareholders spoke out against his pay.
"He makes too much," she said. The coalition opposes the Exelon merger.
Also Friday, shareholders approved a proposal to vote on executive pay every year, along with the re-election of the company's directors.
Separately, Constellation announced that it has agreed to buy Houston-based StarTex Power for $142.5 million.
The acquisition is intended to help the company in its effort to expand its residential power business, and gives Constellation a presence in Texas.
Just two weeks ago, Constellation agreed to buy Connecticut-based MXenergy, a gas and electricity provider with customers in 15 states and two provinces in Canada.
Say on pay
Constellation Energy Group
2010 loss: $982.6 million
CEO Mayo A. Shattuck pay: $15.7 million
Stanley Black & Decker
2010 Profit: $198.2 million
CEO John F. Lundgren: $32.7 million
Nolan D. Archibald, executive vice chairman, (former Black & Decker CEO): $28.2 million
Beazer Homes
2010 loss: $53.8 million
CEO Ian J. McCarthy: $6.9 million
Shareholders voting yes
Under Armour:
2010 profit: $68.4 million
CEO Kevin Plank: $1.3 million
McCormick & Co.:
2010 profit: $370 million
CEO Alan D. Wilson: $6.3 million
Source: Securities and Exchange Commission filings