23 September 2005 Shareholders at technology giant Sun have signalled their unhappiness with the underperforming company by demanding a series of changes that could lead to a sell off.
A group of shareholders has called for the board to remove its ‘poison pill’ provision – a mechanism designed to counter hostile takeovers by flooding the market with extra shares.
“Poison pills…prevent shareholders, and the overall market, from exercising their right to discipline management by turning it out,” wrote Sun shareholder William Steiner in his proposal to overturn the share plan. “They entrench the current management, even when it is doing a poor job.”
There have also been calls for Sun to alter its executive reward scheme, which Sun shareholder the Service Employees International Union some shareholders said “can result in substantial compensation for only modest gain in share price…even if Sun underperformed its competitors.”
In a statement, Sun said: “Executive compensation practices are influenced by a wide range of complex factors. It is important that the committee retain the flexibility to select incentives that balance these influences.”
Sun, like all technology companies, has seen its share price fall from the heady heights achieved during the late 1990s dot com boom. But whereas rivals have seen price improve, Sun’s stock has remained depressed.
The company has also been affected from a change in server buying habits, with users increasingly eschewing high end servers in favour of commodity ones.
Despite the company’s lacklustre performance, CEO Scott McNealy made $11.8 million through exercising stock options in the financial year of 2005. He also received a $1.1 million bonus despite missing targets outlined in the company’s bonus plan.