Executive pay revolt forces Kofax to rethink

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The Independent Online

Kofax, the document-management software maker, is preparing for talks with shareholders after its executive share plan was defeated at the recent annual general meeting.

The majority of votes at the AGM were cast against the share plan, forcing the board to bow to shareholders and go back to the drawing board. Unlike votes on remuneration reports, which are backward-looking, ballots to approve incentive plans are binding and cannot be dismissed by the company.

A motion to extend the share plan by two years was defeated by 52 per cent to 48 per cent. Shareholder protests usually take the form of a large minority rejecting a resolution or withholding support – not a majority against.

The vote was even more extraordinary because Kofax's management owns 28 per cent of the company. William Comfort III, a director with an 18 per cent stake, is said not to have voted because of time constraints but other managers are likely to have voted in favour.

Pirc, the corporate governance consultancy, advised shareholders to reject the share plan ahead of the AGM, held on 3 November. It criticised Kofax for failing to disclose maximum award levels and for having unclear performance targets.

Institutional investors are taking a harder line with companies on pay and governance after failing to rein in company excesses before the credit crisis. The number of shareholder revolts at FTSE 100 companies in the first 10 months of this year outstripped levels for any previous full year.

Kofax's remuneration report also took a mauling with 34 per cent of votes cast against or withholding support. Pirc had opposed the report based on the share-option plan and what it argued was "excessive" general pay during the year.

The re-election of Mr Comfort to the board was opposed by 16.5 per cent of voters. He joined the board in 2007 after his Conversion Capital Partners firm bought a stake in Kofax, which was then called Dicom.

Bruce Powell, the senior independent director, was opposed by 23 per cent of voters at the AGM.

Kofax is listed on the London Stock Exchange but moved its headquarters to the US and is planning a US initial public offering.