Black Box Shareholders Reject Executive Pay Plan

In a non-binding vote, Black Box shareholders rejected an executive officer compensation plan that included $969,000 in severance for former CEO Eslie “E.C.” Sykes.

That award alone is $211,000 more than the current CEO Joel Trammell was paid in all of fiscal 2018, and represented less than a third of the former CEO’s total compensation package.

Sykes left the Lawrence, Pa. solution provider in November 2017 after serving in the CEO position for nearly two years. He received total base pay in fiscal 2018 of $437,000, plus $1.4 million in stock awards, $610,000 in option awards on top of the severance pay -- which included paid time off -- for a total of $3.4 million in total compensation.

Black Box did not immediately respond to a request for comment.

The company announced the outcome in a regulatory filing on Tuesday, which showed an otherwise party line vote by shareholders on Aug. 8 in matters the board recommended, including the hiring of an outside auditor and the composition of the board itself.

According to the SEC filing, 56.3 percent of shareholders – or 4.14 million votes – said no to the board’s recommended pay structure, with 43.6 percent or 3.21 million shares sided with the board.

It’s rare for executive compensation votes to fail. According to a June 6 analysis from executive compensation consulting firm Semler Brossy, just 2.1 percent (32 of 1,498) Russell 3000 companies have had their compensation proposals rejected so far in 2018.

The Russell 3000 tracks the performance of the 3,000 largest U.S.-traded stocks.

[RELATED: In June Qualys shareholders voted to reject their board’s compensation package as well. ]

Executive compensation proposals for public companies in the United States have been subject to an advisory vote since the July 2010 passage of the Dodd-Frank Act.

Most compensation votes don’t just pass, but pass by a wide margin. In 2018, 92 percent of compensation proposals won approval from at least 70 percent of the recorded votes, according to Semler Brossy.

The company -- No. 42 on the 2018 CRN Solution Provider 500 -- has struggled to regain footing after the company saw its shares drop nearly 64 percent from $21.01 to $7.62 in 2015 amid persistent revenue woes, which then-CEO Michael McAndrew blamed on the ’unacceptable’ performance of his sales team. McAndrew was gone in February 2016, replaced by Sykes.

On Tuesday, shares traded higher up 11 percent, or $0.18 to $1.69.

In its proxy statement, Black Box said the current executive board -- CEO Joel Trammell, Chief Financial Officer David J. Russo, and general counsel Ron Basso -- is paid below market rate, in terms of salaries.

“The base salaries of our named executive officers, based on the survey data presented by our compensation consultant, are positioned relative to the market median as follows: Mr. Trammell - 5% below market; Mr. Russo - 13% below market; and Mr. Basso - 10 percent below market,” the company said.

Current CEO Joel Trammell received $650,000 in base pay plus $143,000 in other compensation in fiscal year 2018.

Russo’s base salary of $370,000 was enhanced with $585,000 in stock awards as well as $166,000 in option awards, for total compensation of $1.1 million. Basso had his $367,000 base salary, boosted with $514,000 in stock and $220,000 in options for $1.1 million.

None of the executives were awarded bonuses, which the board had tied to company performance benchmarks that it said were not met, according to the proxy statement.

In November 2017, Sykes was replaced by Trammell, who has been a board member at Black Box since 2013. Trammell has worked to turn the company around by selling its federal services business, as well as inking a deal with a “social media giant” that could be worth $300 million over 10 years.