Harley-Davidson shareholders sent a message of sorts to the company’s board last year. In an advisory vote on executive compensation, 63% of shares voted to support the company’s pay plan.
Prior to 2018, the company had averaged 96% support in say-on-pay votes.
Harley’s board and executives took notice of the decrease in support. The chair of the board’s human resources committee, Harley’s chief human resources officer, corporate secretary and investor relations team launched an effort to understand shareholder concerns.
The group targeted the company’s largest shareholders who represent around 50% of outstanding stock. Shareholders representing around 25% of Harley stock took the company up on its invitation to discuss executive pay.
“In general, shareholders were supportive of our executive compensation philosophy, but did have questions about some aspects of how we set compensation and the overarching alignment of pay with performance,” Harley said in its annual proxy filing with the SEC.
Harley’s board ultimately made a number of changes to its executive compensation plan, including dropping 14 companies from the peer groups it uses to make compensation decisions, adding a metric in short-term incentive tied to retail sales growth and a long-term incentive metric tied to successful new product launches.
The result was support from 73% of shares voted, an improvement from last year but still well below historical averages.
The changes included dropping companies with more than 2.5 times the revenue of Harley from its manufacturing and branded company peer groups. The decision removed companies like Johnson Controls, McDonald’s, Starbucks and Nordstrom from the list of firms Harley uses to help set its compensation.
In short-term incentive, Harley replaced a new rider growth metric with one targeted at new retail sales volume growth to help focus the company on growing sales in the near-term. Worldwide retail sales of Harley’s decreased 6.1% in 2018 and 6.7% in 2017, primarily because of falling sales in the United States.
The changes will apply to the company’s 2019 executive compensation. Four of Harley’s five named executive officers actually saw decreases in total compensation in 2018. Lawrence Hund, president and chief operating officer of Harley-Davidson Financial Services, was the only named executive to see an increase in total compensation.
Matt Levatich, Harley’s president and chief executive officer, went from $11.1 million in total compensation in 2017 to $9.2 million last year. The decrease was primarily the result of a change in pension value and a drop in non-equity incentive compensation. Stock awards were up slightly.
Despite below average support for Harley’s compensation plan, the topic of executive pay did not come up during the company’s annual meeting in Milwaukee last week. Some shareholders did question the performance of Harley’s stock while others focused on new product suggestions and the ongoing impact of tariffs on the business.
