Nearly half of shareholders voted to reject Xero's remuneration report
Xero is facing a backlash from investors after nearly half of them rejected the company's proposed remuneration report that includes a massive pay package for chief executive Sukhinder Singh Cassidy.
The results of Xero's annual general meeting on Thursday revealed that 48.74% of its shareholders voted against the adoption of the company's remuneration report.
Under Australian Stock Exchange rules, a vote of more than 25% opposing a company’s pay practices constitutes a formal "strike" and a two-strike rule, where 25% or more of shareholders vote against a company’s remuneration report at two consecutive annual general meetings, can trigger a vote to remove the board.
But Xero is legally registered and headquartered in New Zealand, even though it operates globally and is listed on the ASX, where the two-strike rule does not apply.
However, David Thodey, chair of Xero's board, said they are committed to listening to shareholder feedback.
"While we are committed to listening and responding to this feedback, we are also committed to attracting, motivating, and retaining the global talent required to lead Xero's global strategy," he said during the annual meeting.
Debate over CEO pay
The strike comes amid ongoing debate over the US-based Cassidy's target pay package, which was increased to USD $15.2 million following a board review in December 2024.
Susan Peterson, chair of Xero's People and Remuneration Committee, stated in the remuneration report that the board reviewed Cassidy's remuneration as part of a commitment made when she was appointed CEO in November 2022.
As part of the commitment, the board would review her remuneration against similar US-based global tech CEOs once she had proven her performance.
"The board applied the same principles that apply to all Xeros in respect of Sukhinder's remuneration review; namely an assessment of her individual performance, an assessment of the scope and criticality of her role, and her location," Peterson said in a previous letter to shareholders.
According to Peterson, Cassidy's performance before the board review was below the 10th percentile of the benchmarked peer group.
"Following remuneration review, all components of Sukhinder's compensation now sit at the 50th percentile or market median of the benchmarked peer group," she said.
But proxy advisory firms Institutional Shareholder Services and Glass Lewis have advised against approving the deal before the annual general meeting, the Australian Financial Review reported.
According to the report, the ISS referred to the deal as "problematic pay practices" that were out of line with the Australian market.
Thodey, however, said during the annual meeting that the remuneration report seeks to secure world-class leadership needed to execute the company's strategies.
"It is founded on strong principles that connect reward to performance and is designed to attract the world-class talent needed to deliver our global strategy," he said. "As one of the few truly global SaaS companies on the ASX, securing leadership in a competitive international market is essential to creating long-term shareholder value."
