DEFA14A: O-I Glass Defends Executive Pay After ISS Recommendation Against 'Say on Pay' Proposal

O-I Glass urges shareholders to support its executive compensation program, despite a negative recommendation from ISS regarding payments to former CEO Andres A. Lopez.

Summary

• O-I Glass is seeking shareholder support for its executive compensation program (Say on Pay Proposal) at the upcoming Annual Meeting on May 14, 2025.
• The company is responding to a recommendation from Institutional Shareholder Services Inc. (ISS) against the Say on Pay Proposal.
• ISS's primary concern is the cash payments made to former President and CEO Andres A. Lopez upon his retirement, specifically related to legacy life insurance, pension, and retirement plans.
• O-I Glass argues that these payments were the result of legal obligations established decades ago under plans closed to new participants since as far back as 2004.
• The company emphasizes that these historical benefit plans are not indicative of the current executive compensation program.
• O-I Glass highlights that its shareholders have overwhelmingly supported the compensation of named executive officers (NEOs) in recent years, with approximately 97% approval in 2024, 2023 and 96% in 2022.
• Glass Lewis & Co. has recommended that shareholders vote FOR all proposals, including the Say on Pay Proposal.
• The company believes its executive compensation program reflects a strong pay-for-performance philosophy, responsible governance, and respect for legacy obligations.

Sentiment

Score: 6

Explanation: The document is defensive in nature, attempting to justify executive compensation practices in the face of criticism. While highlighting shareholder support and commitment to performance, the need to address negative recommendations from ISS suggests underlying concerns.

Positives

• Shareholders have overwhelmingly supported the executive compensation program in the past, with high approval rates in recent years.
• Glass Lewis & Co. recommends voting FOR the Say on Pay Proposal.
• The company emphasizes its commitment to pay-for-performance and alignment with shareholder interests.
• The company is honoring its historical commitments and contractual obligations to its executive officers.

Negatives

• ISS has recommended against the Say on Pay Proposal due to concerns about cash payments to the former CEO.
• ISS considers the payments to Mr. Lopez as excessive, unusual and problematic.

Risks

• Negative shareholder vote on the Say on Pay Proposal could signal dissatisfaction with the executive compensation program.
• Continued scrutiny from proxy advisory firms could lead to further challenges in gaining shareholder support for executive compensation.
• Reputational risk associated with perceived excessive payments to executives, even if contractually obligated.

Future Outlook

The company is confident that its executive compensation program will continue to have the support of proxy advisors in the coming years and remains committed to focusing on and creating value for its shareholders.

Management Comments

• We respectfully reject ISSs characterization of the payments described above as excessive, unusual or problematic.
• We strongly believe that it is important that our Company honor its historical commitments and contractual obligations to its executive officers.
• We firmly believe that our executive compensation program reflects our commitment to pay for performance, responsible governance and an alignment of our executives compensation with our share owners interests.

Industry Context

Executive compensation practices are under increasing scrutiny, with proxy advisory firms playing a significant role in influencing shareholder votes. Companies are facing pressure to align executive pay with performance and to justify legacy compensation arrangements.

Comparison to Industry Standards

• While O-I Glass argues that its legacy plans are not indicative of current practices, many companies in the manufacturing sector have moved away from defined benefit pension plans and tax gross-ups on executive perquisites.
• Companies like Ball Corporation and Crown Holdings, Inc., which are competitors of O-I Glass, have largely transitioned to defined contribution plans and performance-based equity compensation for their executives.
• The prevalence of tax gross-ups has also declined across industries, with many companies eliminating them to align with shareholder expectations for responsible compensation practices.

Stakeholder Impact

• Shareholders are being asked to vote on the executive compensation program.
• The outcome of the vote could impact the company's reputation and its ability to attract and retain executive talent.
• Employees may be affected by the company's compensation policies and practices.

Next Steps

• Shareholders are encouraged to review the Proxy Statement and vote on the proposals.
• The company will hold its Annual Meeting on May 14, 2025.

Key Dates

Keywords

executive compensation, say on pay, proxy statement, ISS, shareholder vote, O-I Glass, retirement benefits, legacy plans