BIONIC ear maker Cochlear has been rebuked on executive pay, with more than 30 per cent of shareholders voting against its remuneration report and a long-term incentive plan for its chief executive, after a product recall blemished the company's pristine safety record.
The votes mean Cochlear has received a ''first strike'' on executive pay, the first for the annual meeting season. If Cochlear receives another ''no'' vote of more than 25 per cent next year, a motion to spill the entire board will be put to shareholders, which must receive more than 50 per cent of the votes to succeed. A spill meeting must then be held within 90 days.
The vote came after the Australian Shareholders' Association and proxy adviser CGI Glass Lewis pledged to vote against awarding $1 million in options to Chris Roberts, arguing the performance hurdles were too low and the CEO's large shareholding should be sufficiently motivating.
The long-term incentive plan received 32 per cent disapproval; the remuneration report a 30 per cent no vote.
The result follows a remarkable 2012 fiscal year for Cochlear, marred by its first ever product recall. The voluntary recall of the CI500 series implant in September sparked a 68 per cent dive, a $100 million-plus provision, and a debate about the long-term damage to Cochlear's reputation.
But Shane Storey, healthcare analyst with Wilson HTM, agreed with Cochlear chairman Rick Holliday-Smith that the ''no'' votes were disappointing. ''Recalls happen, but the question is how do you deal with it. And management put in a virtuoso performance there,'' Dr Storey said.
He tipped Cochlear would return to the 68 per cent market share enjoyed before last year's voluntary recall.
The Sydney-based company yesterday reported ''minimal'' market-share loss from the recall.
Mr Holliday-Smith told shareholders yesterday that he was satisfied the board had made decisions that were ''commercial and in the interests of employees and shareholders''.
''For many years we have received strong shareholder support as we try to ensure fair and reasonable commercial decisions over a long period of time.
''As such it is disappointing that some shareholders have voted against our remuneration-related decisions as set out in this year's notice of meeting.
''However, the board and I recognise this is a complex field and there are a range of understandable views. We have always been willing to listen and engage with shareholders and be responsive, and that will be the case as we move on from here.''
He added that the board had decided not to increase their fees for the 2012 and 2013 financial years, and would review fees ''in terms of fair market levels in the future''.
Cochlear shares were undaunted by the AGM, closing 1.48 per cent, or $1.05 higher to $71.92.