In a major “say-on-pay” vote, Motorola received just 46 percent support during an advisory ballot on its executive pay practices, according to investors who attended the company’s May 3 annual meeting.

Proxy_ISThe vote, reported by RiskMetrics Group, a proxy and governance research firm, marks the first time that a U.S. company has failed to earn majority support from shareholders during a non-binding vote on compensation. RiskMetrics said Illinois-based Motorola was one of only a handful of U.S. issuers that last year had less than 65 percent for its pay practices.

The non-binding vote is likely to result in a dialogue between shareholders and the company.  “The company takes these matters very seriously and will be engaging with our shareholders to get a better understanding of any specific concerns they may have about our compensation policies and procedures,” a Motorola spokeswoman told The Wall Street Journal.

Prior to the vote, The Corporate Library, a governance research firm, expressed concern regarding Motorola’s co-CEO leadership structure because it “ultimately seems to pay two executives at relatively high rates of compensation.”

The Corporate Library said it was “particularly concerned with co-CEO Sanjay K. Jha’s inducement award pursuant to his original employment agreement of 2008. As part of his golden hello, Mr. Jha received a mega mega-grant of 16,594,884 stock options and a mega-grant of 3,667,422 restricted stock units. On top of that, he also received a guaranteed $1.2 million bonus in 2009 and a guaranteed $2.4 million bonus in 2008. Contractually guaranteed bonuses do nothing to align executive compensation with a pay-for-performance philosophy.”

While Motorola’s co-CEO structure is intended to facilitate the successful separation of Motorola into two independent, publicly-traded companies, The Corporate Library said, “we think shareholders would benefit if the co-CEOs were to be installed after the successful separation and not before.”  In fact, the planned separation has now been delayed until at least the first quarter of 2011. In the event that there is no separation, Mr. Jha will be entitled to a cash payment of $38 million, according to The Corporate Library.

Some 55 publicly-held U.S.-based companies have now voluntarily agreed to hold annual advisory shareholder votes on executive compensation, according to shareholder advocates who have been pushing for adoption of the practice.

The number of companies with so-called “say-on-pay” votes has increased from only 6 in 2008, when Aflac Inc. became the first to adopt the practice, and 19 in 2009.

Post to Twitter