Arm Holdings, the British semiconductor giant, is facing a potential backlash from shareholders over a proposed compensation package for its chief executive, Rene Haas. The plan, which could award Haas up to $800 million (£590 million) in shares, is contingent upon transforming Arm into a trillion-dollar company. The proposal has drawn criticism from shareholder advisory firms Institutional Shareholder Services (ISS) and Glass Lewis, who have urged investors to reject the deal.
The contentious "value creation plan" (VCP) would grant Haas escalating share awards if Arm's valuation reaches $1 trillion, with further bonuses if the company hits $1.5 trillion and $2 trillion. ISS, in its advisory note, expressed concerns about VCPs, noting that they are rare in the UK and questioned their effectiveness in enhancing company performance. Glass Lewis echoed these sentiments, labeling the package as excessive.
Arm's shareholders will cast their votes on the proposed compensation at the company's annual meeting scheduled for September 9. Currently, Arm is valued at $264bn, having seen a significant drop in its market value since a peak in June. The share award for Haas would only be realized if he can significantly boost the company's share price.
Despite the criticism, the likelihood of the pay scheme being overturned appears slim. Japanese conglomerate SoftBank, which owns 86% of Arm's shares, holds substantial influence over the decision. ISS has also advised shareholders to vote against the re-election of Haas and Masayoshi Son, SoftBank's chairman, citing a lack of independent directors on Arm's board.
Arm, originally founded and headquartered in Cambridge, is listed on the Nasdaq, and Haas resides in California. The company defended the proposed compensation, stating it aligns with US standards, reflecting the competitive landscape for executive talent and the company's Nasdaq listing.
Arm has bet its future on selling more AI chips to data center companies but the company's shares have suffered in recent months amid a slump in the smartphone market caused by higher prices. The company did not respond to a request for comment.
