(Adds Rite Aid statement, CtW proposal details)
June 25 (Reuters) - Rite Aid Corp’s shareholders on Thursday voted in favor of a proposal to change the terms of payments to its CEO and other top executives in case the drugstore operator is taken over, supporting a union-backed investor group over the company’s board.
Rite Aid CEO John Standley stands to receive $42 million, including $31.6 million through the accelerated vesting of outstanding equity awards, if he loses his job in the event the company is taken over.
Such payments, called a golden parachute, are contracts that give a top executive substantial benefits if the company is taken over and the executive is terminated as a result.
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 executive’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’s board will take the shareholder vote regarding this matter under advisement,” a company spokeswoman told Reuters.
There has been speculation that Rite Aid could be an acquisition target. Pharmacy giant Walgreens Boots Alliance Inc has 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.
When CtW Investment made the proposal in May, it said if Rite Aid implemented the resolution, such a move would not affect any contracts in existence on the date the policy was adopted.
CtW Investment changed its stance on Thursday, saying if Rite Aid’s board agreed to change its policy, it should also consider enforcing the new policy on current contracts as well.
CtW Investment owns 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 0.6 percent at $8.63 in late afternoon trading. (Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D’Souza)