View: US taxpayers, Intel thanks you for rubber-stamping CEO's pay package

State-run economies centralize accountability and make it harder for outsiders to influence decisions like how much to pay the CEO.

There is a parallel feature in the deal Intel's leaders struck last month to give the U.S. government about 10% of the shares in the challenged chipmaker. That stake now becomes a rubber stamp in the boardroom.

According to an August 25 securities filing, the U.S. Department of Commerce "must vote any shares of common stock held by it in favor of the nominees of and any proposals recommended by the Company's Board of Directors, and against any other nomination or proposal not recommended by the Board of Directors," with a few exceptions.


At first glance, this sounds in line with the goal of keeping the public investment passive and removing public officials from corporate decision-making, even though the Commerce Department will now become Intel's largest investor.

But the arrangement also gives corporate executives more power over non-public shareholders on votes on things like directors or shareholder resolutions.

Critics say better terms might prorate the government's votes to neutralize their impact. The specifics matter since U.S. President Donald Trump has said he wants to make more investments modeled on the Intel deal.

COUNTER TO PUBLIC OPINION
Take the charged question of executive pay. Intel received only 72% support from shareholders in an advisory "say on pay" vote at its May 6 annual meeting, well below the 90% average for S&P 500 companies this year, according to pay consultant Semler Brossy.

Proxy adviser Institutional Shareholder Services recommended investors vote against the pay. ISS cited among other things "a problematic cash severance" of $7 million for former CEO Patrick Gelsinger, who resigned in December after losing board support.

Seen in that light, Commerce Department support for CEO pay might not line up with public opinion.

In a survey last year, Gallup found 66% of Americans said companies were doing a "poor" job of avoiding major pay gaps between CEOs and employees. In a filing, Intel said that on an annualized basis Gelsinger made $27.6 million last year, 287 times the pay of its median employee and about the same as the 285:1 ratio at the typical S&P 500 company.

For pay deals that are unusually high, automatic U.S. government support would be "completely out of step with what people want and think about CEO pay," said Cynthia Clark, a Bentley University professor who researches corporate governance and helped create the Gallup survey and analyze its results.

I was thinking a way to sidestep the issue would be for the government to abstain from voting its shares. But Karla Bos, an independent corporate governance consultant, told me some of those votes would count as "against" votes under Intel's voting standards.

Better, she said, would be for the government's shares to be cast under what is called "mirror voting" whereby they would be proportionately voted in line with all other votes cast and neutralize the government's influence.

Vanguard created a "mirror voting" policy choice for its own investors this year.

Bos said the change would be more in the spirit of proxy voting, for investors to thoughtfully consider issues. The votes of big investors were first made public 21 years ago because "there was too much rubber-stamping going on," Bos said.

NO BLANK CHECK
An Intel spokesperson said the company is committed to strong corporate governance, and noted the government gets no board representation or information rights.

"This approach is designed to prevent government involvement in the management of the company, while aligning the government's interests with those of all shareholders," the Intel spokesperson said via e-mail.

Asked about the pay vote result, the spokesperson said that "We take our investors' feedback seriously and are committed to continued engagement with them."

A Trump administration official, speaking on condition of anonymity, said Intel has hardly received a blank check from the government and shouldn't take the public support for granted.

In a statement, the White House reiterated points it has made previously that the agreement with Intel was an improvement on grants previously made by the Biden administration that did not include an equity stake.

"Now the Trump administration has secured a fair bargain for taxpayers by ensuring that they are able to reap the upside of the federal government's investments into safeguarding our national and economic security," the statement said.

(The opinions expressed here are those of the author, a correspondent for Reuters)