AECOM shareholders maintain board members despite investor complaints

At AECOM's annual meeting on March 6, shareholders voted to authorize all four proposals the company presented to them, according to an AECOM filing with the Securities and Exchange Commission on Tuesday, March 12.

Stockholders approved all of the company's nominees to the board of directors; the "say on pay" resolution on executive compensation; the company's amended and restated employee stock purchase plan; and selection of Ernst & Young LLP as the company’s independent registered public accounting firm for the fiscal year ending September 30, 2019. Shareholder votes leaned overwhelmingly in favor of the company's proposals.

AECOM said its board of directors and management "values the support and feedback received from its stockholders," in its Form 8-K filing, but declined to comment further.

Among AECOM's other high-profile projects, New York officials announced that the team of AECOM Tishman and Skanska USA is one of three finalists competing to design and build the $750 million replacement for the Wadsworth Center Laboratory in Albany, New York. The shortlisted teams are Gilbane Building Co. and Turner Construction, in association with HOK, and the joint venture of Pike Co. and McCarthy Building Co.

Dive Brief:

In a Feb. 12 open letter to AECOM shareholders in advance of the company’s annual meeting on March 6, shareholder and investment firm Engine Capital said it intends to vote "withhold" against those board members who are up for reelection, particularly those on the compensation committee. Engine said executive pay is too high in the wake of substandard performance.
Engine said that despite AECOM's position as a leader in the industry and its generation of a significant amount of cash, share performance has suffered due to a “broken culture” of poor compensation practices, inadequate corporate governance and a lack of accountability. The investment firm said that since AECOM Chairman and CEO Michael Burke took over in March 2014, the company’s stock is down 9% compared to the S&P 500’s 44% gain and that Burke has received almost $80 million in total compensation.
Engine’s suggestions for the company include raising the bar for the earning of short-term bonuses, including tying them to long-term stock performance, and prohibiting one person from holding the positions of chairman and CEO at the same time.

Dive Insight:

Construction Dive reached out to AECOM for a response to Engine’s letter, but the company declined to comment.

Engine uses an Institutional Shareholder Services (ISS) analysis from 2018 to bolster its claims against AECOM. However, a more recent ISS report indicated that AECOM has responded to shareholder concerns about its compensation and management practices in the last year and recommends a “For” vote for all of the company’s management proposals being decided at the March meeting, including executive compensation and election of board members.

As part of its key takeaways, though, ISS did advise shareholders that they should continue to monitor AECOM’s cash flow goals and incentive payouts.

In November, AECOM announced several measures intended to increase the company’s performance including a change of leadership in its construction division, an exit from 30 smaller countries so that it can focus on its biggest growth markets and the implementation of a $225 million expense reduction plan.

Earlier this month, crews broke ground on The Grand, the Related Cos.’ $1 billion Frank Gehry-designed mixed-use project in downtown Los Angeles, for which AECOM is serving as construction manager. The project, which should be complete in 2021, will feature almost 180,000 square feet of retail; a 39-story, 400-unit luxury apartment building; a 20-story, 309-room Equinox Hotel with meeting and event space, as well as other amenities; a movie theater; a public plaza with open terraces; and restaurants.

AECOM, with its joint venture partner Turner Construction, is also reportedly in the running for another Los Angeles mega project — a new arena for the NBA’s Clippers. The team’s current lease at the Staples Center expires in 2024, and the owners are in negotiations with the city of Inglewood, California, for a parcel there. AECOM and Turner are currently building a new $2.6 billion stadium in Inglewood where the Los Angeles Rams and Los Angeles Chargers will play.