// TOM'S HARDWARE US — HARDWARE & GADGET
Arm faces potential shareholder revolt over CEO's 'excessive' $800 million pay package — huge stock award would only be fully realised if chip designer hits $2 trillion valuation
Haas runs Arm while also holding a senior executive role inside Arm’s controlling shareholder, SoftBank.
When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works.
British semiconductor and software design company Arm is asking shareholders to approve a massive performance-based pay package for CEO Rene Haas worth up to $800 million if the company reaches a $2 trillion valuation, a move that has drawn pushback from proxy advisors ahead of a September 9th vote. According to an August 31 report by the Telegraph, the company is facing a potential shareholder revolt as proxy advisory firms such as Institutional Shareholder Services (ISS) and Glass Lewis urged investors to vote against the compensation plan, calling it excessive.
The compensation is arranged through a one-time Value Creation Plan (VCP) consisting of 425,000 Performance Share Units (PSUs), with the award divided across three market-cap milestones, according to Arm's regulatory filings. Haas earns 25% if Arm reaches $1 trillion by March 31, 2029; 50% cumulatively if Arm reaches $1.5 trillion by March 31, 2030; and the full award if Arm reaches $2 trillion by March 31, 2031. Arm will determine whether each target has been reached by using its rolling-average closing share price over any 60-day period prior to the corresponding deadline.
The shares also carry lengthy vesting periods. Awards associated with the $1 trillion, $1.5 trillion, and $2 trillion milestones vest on April 1 of 2031, 2032, and 2033, respectively, subject to Haas remaining employed by Arm. Meanwhile, missed interim milestones can roll forward. For example, shares attached to an earlier target can remain available if Arm subsequently reaches a higher milestone. The roughly $800 million maximum payout reflects the implied value of all 425,000 shares if Arm reaches the $2 trillion target, which corresponds to a share price of roughly $1,880.
ISS has raised concerns about the potential size of the award and the use of VCP-style compensation in Britain. The advisory firm said such plans remain uncommon in the UK market and can create the prospect of extremely large gains, while their effectiveness at improving corporate performance remains unproven. Glass Lewis has similarly recommended shareholders oppose the proposal, describing Haas's potential award as “excessive.” Arm currently has a market capitalization of around $264 billion, according to The Telegraph, leaving a substantial climb before the first $1 trillion milestone comes into range. The company's servers currently capture over 45% of data center revenue.
Arm argues that its compensation structure needs to be competitive with that of the US technology industry. The Cambridge-based company is listed on Nasdaq, Haas is based in California, and many of the companies competing with Arm for executives and engineers are American technology and semiconductor firms. Arm said its approach is designed around US compensation standards reflecting “the location of our key competitors for executive and other talent,” its Nasdaq listing, and the location of its CEO. The revised remuneration policy also raises the maximum achievement level for Haas's regular PSU awards from 125% to 200%, in addition to the separate VCP.
The shareholder advisers are also calling out Arm's corporate governance. ISS has recommended votes against the re-election of Haas and Arm chairman Masayoshi Son, citing insufficient independence on the company's board. Arm's own filings show that Japan’s SoftBank beneficially owned about 86.4% of Arm as of May 21, giving the Japanese conglomerate control over most matters put to a shareholder vote and substantial rights over board composition. Arm qualifies as a “controlled company” under Nasdaq rules and therefore uses exemptions from some governance requirements that apply to companies without a controlling shareholder.
Haas's expanding relationship with SoftBank adds another layer of go