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June 25 (Reuters) - Drugstore operator Rite Aid Corp's shareholders on Thursday voted to change the terms of payment for its chief executive's golden parachute, supporting a union-backed investor group over the company's board.
Rite Aid CEO John Standley stands to receive $42 million if he loses his job in the event of the company being taken over, including $31.6 million through the accelerated vesting of outstanding equity awards.
CtW Investment Group, which has a nominal stake in Rite Aid and advises funds holding a 0.18 percent stake, had proposed to limit the accelerated vesting, saying the amount should instead be paid on a pro-rata basis, based on the CEO's performance until a takeover.
CtW Investment said it sought to rein in the value of accelerated equity as such payments should not be based on what an executive might have earned if he or she had not only kept the position after a takeover but also met performance targets.
According to preliminary results, 58 percent of Rite Aid shareholders voted in favor of the proposal, according to a statement from CtW Investment, which is affiliated with Change to Win, a federation of unions.
Rite Aid was not immediately available for comment.
There has been speculation that Rite Aid could be an acquisition target. Pharmacy giant Walgreens Boots Alliance Inc have expressed interest in buying the company in the past.
While proxy advisory firms Glass Lewis and ISS supported CtW Investment's proposal, Rite Aid had argued that such a move would potentially undermine its compensation program and ability to retain executives.
CtW Investment has asked that if Rite Aid changes its policy, the move should be applicable to both current and future CEO contracts.
CtW Investment owned 865 Rite Aid shares, according to a May 15 regulatory filing, and says it works with pension funds that are associated with Change to Win and manage $250 billion in assets.
Rite Aid's shares were off 0.5 percent at $8.64 in afternoon trading. (Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza)