Tower Semiconductor Shareholders Reject New Compensation Policy but Approve CEO Salary Increase
At Tower Semiconductor's recent annual general meeting, shareholders voted against the company's proposed new compensation policy, resulting in its rejection. Despite this, other proposals, including a salary increase for CEO Russell Ellwanger and equity-based compensation for directors, were approved by the required majority. The compensation policy vote is mandated by Israeli corporate law, which requires shareholder approval every three years, unlike non-binding "say on pay" votes common in U.S. companies. The previous policy was approved in 2023 with some amendments in 2024. Opposition to the new policy reportedly came from both Israeli and U.S. institutional investors, including major stakeholders such as Migdal, Menora, Phoenix, and T. Rowe Price.
Following the vote, Tower plans to engage with key shareholders to understand their objections and determine next steps. Since the vote covers the entire policy, dissenters opposing specific elements had to vote against the whole proposal. Israeli law allows the compensation committee and board to override shareholder decisions in exceptional cases after review and justification. Tower's board and compensation committee stated they will consider the vote results carefully, maintaining strong corporate governance and supporting the company’s long-term strategy.
The approved CEO salary increase raises Ellwanger's annual pay by 5% to $1.08 million. However, a proposal to increase his maximum bonus from 175% to 225% of his salary was rejected, as was a proposal to raise annual equity allocations for senior executives (excluding the CEO) from five to seven times their annual salary. Tower is traded on NASDAQ and the Tel Aviv Stock Exchange with a market capitalization of $26.1 billion, reflecting a 386% stock increase over the past year but a 31% drop from a recent peak two weeks ago. This contrasts with the semiconductor index’s 133% rise over the year and 11.9% decline in the last two weeks.
Ahead of the meeting, Tower published detailed disclosures and urged shareholders to approve the compensation policy, emphasizing its alignment with the company’s strategic growth plans and significant market value increase since the last policy approval. Chairman Amir Elstein highlighted the policy’s role in incentivizing management to meet long-term company goals. Nonetheless, many shareholders remained unconvinced, leading to the policy’s rejection while still approving the CEO’s pay raise and equity awards.
