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Shareholders Turn Up The Heat On Domino's Pizza CEO Pay

On Tuesday, shareholders of Domino's Pizza will decide whether to oust the chairman of its compensation committee, who granted a $43 million, three-year payout to the company's CEO under terms that industry observers say are unprecedented.

Posted on April 28, 2014, at 4:53 p.m. ET

Luke Macgregor / Reuters / Reuters

Domino's Pizza's stock has been on a tear in the last year, but that hasn't stopped a group of large shareholders from questioning the way CEO J. Patrick Doyle is getting paid — $43 million over three years — and who is pulling the compensation strings at the pizza giant.

Domino's annual shareholder meeting will take place Tuesday, and with it will likely come a contentious battle over the re-election of board member Andrew Balson, a former Bain Capital executive, who is the lead decision-maker when it comes to compensation matters on the board.

Pension plan advisory firm CTW Investment Group, which sent a letter to the largest Domino's shareholders, argues that Doyle's compensation package puts shareholders at risk of losing a lot of money, despite the gains its stock has made in recent years. The California State Teachers' Retirement System, one of the largest pension funds in the country, has also taken issue, having publicly disclosed its intention to withhold support for Balson's re-election to the board at Tuesday's meeting.

"As our shareholder meeting and final tabulation of the votes on our proxy will not be complete until Tuesday, we believe it's inappropriate to comment before our shareholders have their say," a Domino's spokesperson said.

Making things even worse for the chair of Domino's compensation committee, both proxy advisory firms Glass Lewis and Institutional Shareholder Services have sided with CtW's campaign, which senior governance policy analyst Michael Pryce-Jones will reiterate at the shareholder meeting in Ann Arbor, Mich.

"Shareholder returns can really hide all sorts of bad pay practices that can blow up in shareholders' faces down the line," Pryce-Jones said. "What is unique in Domino's is that investors are looking through the performance, and how short-term the pay practices actually are."

The problem is, that plan has a six-month component, where half of Doyle's compensation can be paid out in the first six months, despite the threat of the company not meeting annual performance goals, Pryce-Jones said, adding that Doyle's pay package is two to three times the average pay in similar industry sectors, and Balson has granted him and the board discretionary equity options in the last year.

"They could lose money by the end of the year," Pryce-Jones said. "Most people would be very concerned about any plan that causes management to miss yearly objectives."