Gen Digital shareholders vote down executive pay

Boardroom Alpha · Executive Brief

Gen Digital (GEN) shareholders rejected the company’s executive pay at the September 9 annual meeting, with 40.6% support, down from 93.3% a year earlier, according to an 8-K filed after the close on September 11. It was the company’s first failed pay vote since the votes began in 2011. The 307.1 million shares voted against equaled 51.3% of all shares outstanding. By our count, 22 of the 2,758 companies whose 2026 results were filed by September 11 failed the vote. Gen said it “will continue to meaningfully engage with stockholders.”

The vote covered fiscal 2026, which ended April 3. CEO Vincent Pilette’s reported pay rose to $83.6 million from $22.5 million, according to the 2026 proxy. Most of the increase was a one-time performance award, VCP II, with a $28 million target. The pay table values it at $50.1 million because the award can double on the stock’s relative return; on the company’s target-value basis Pilette’s pay was $52.9 million. Over the fiscal year the stock’s total return was −27%, against +19% for the S&P 500. Gen filed nothing before the meeting to defend its pay.

Five questions shareholders will be asking:

1. What will the board do about the one-time award? It can pay up to six times its target, and revenue from acquisitions counts toward its goals.
2. Why did every other part of executive pay go up? Salaries, bonus targets, annual stock awards and severance all rose.
3. How will the board engage the holders who voted against? The proxy said investors it met after last year’s meeting raised no concerns.
4. What will the pay committee change? Its chair, Nora Denzel, had the lowest director support, 88%, down from 97.9%.
5. Will the board revisit combining the chair and CEO roles? Shareholders backed an independent chair in 2021; Pilette became chair in July 2025.

Questions for the board

1. What will the board do about the one-time award?

The board’s independent members approved VCP II in July 2025 for a few senior executives, citing the MoneyLion acquisition and the “second phase of our transformation.” Pilette’s target is $28 million; chief financial officer Natalie Derse and Bryan Ko, now chief operating officer, each have $7 million targets. The terms:

• For executives who stay through fiscal 2030, it pays nothing unless revenue over the best four straight quarters in fiscal 2027 through 2030 reaches $6 billion, then 100% of target at $6 billion, 200% at $7 billion and 300% at $8 billion.
• A stock-return modifier against the Nasdaq Composite halves or doubles that, so the award can pay up to six times target: 5.7 million shares for Pilette, about $173 million at the September 11 price. The payout is capped at target if the stock’s return is negative.
• Revenue “from any acquisitions or strategic transactions shall be included.”
• It pays at least target, pro rata, on a termination without cause after the first year; at target on death or disability; and at target or better if a buyer does not assume it.

Fiscal 2026 revenue was $5 billion, including $823 million from MoneyLion, acquired in April 2025. From the midpoint of Gen’s fiscal 2027 forecast, revenue would need to grow about 3% a year through fiscal 2030 to reach the first tier, and about 9% and 14% a year for the second and third, our arithmetic shows. Revenue excluding MoneyLion grew about 6% in fiscal 2026, a 53-week year.

The 2025 proxy, filed before last year’s vote, described the design: a grant of about one times the annual stock award, no payout below 50% revenue growth, and goals reachable through “organic growth and/or synergistic acquisitions.” The grant values, the dollar goals and the six-times maximum first appeared this year, and Pilette’s award came to 1.33 times his annual grant. Several investors that publish their votes, among them KLP and Candriam, gave the same explanation for voting against. It cites “a quantitative pay-for-performance misalignment” and adds that “the award is outsized and the potential for above-target vesting up to six times larger than the original target is not in line with traditional market practice.” Shareholders may ask whether the board will change the award’s terms, for example by excluding acquired revenue, and whether it will rule out more one-time grants.

2. Why did every other part of executive pay go up?

Excluding the one-time award, Pilette’s reported pay rose 49%. Every named executive got a raise at the start of fiscal 2026, after a year in which the stock’s total return was +20%, against +8% for the S&P 500:

• salaries rose 5% to 13%, and Pilette’s to $1 million from $950,000;
• Pilette’s bonus target rose to 150% of salary from 125%;
• his annual stock award target rose 45%, to $21 million.

In November 2025 the board adopted a new severance plan. It pays two times salary plus target bonus, $5 million for Pilette, where the old plans paid one times salary, or one times salary plus target bonus after a change in control. Performance shares now vest pro rata at target after a termination without cause.

The committee also reshaped the peer group it benchmarks pay against, adding eBay, Expedia, Pinterest, Rocket Companies and SoFi for the move into financial services and dropping six, including Check Point, Okta and Workday. The proxy says the company “determined not to make any changes” to the program for fiscal 2027. Shareholders may ask the board whether it will reopen that decision.

3. How will the board engage the holders who voted against?

The 2026 proxy says Gen contacted its 20 largest shareholders, held discussions with a majority, and that in that “offseason engagement following the 2025 Annual Meeting, stockholders did not express any concerns with our executive compensation program, including our VCP II program.” Those meetings came before the award’s dollar terms were published in July. At the meeting, with 91.2% of shares represented, 59% of the votes cast opposed the pay.

US funds won’t report their votes on Form N-PX until the end of August 2027. A small group of investors, mostly public pensions and non-US managers, publish votes earlier, and their explanations show why they objected. Florida’s State Board of Administration cited a “Pay for performance disconnect”; PGGM said “One-off payments have been granted”; Legal & General said “the approved remuneration policy should be sufficient”; and Allianz objected to plans that let awards vest “for performance inferior to that of the selected peer group.” Several of these investors also voted against Eric Brandt, the audit committee chair, after a proxy advisor questioned his independence because his daughter works at Gen; the board said he is independent and has no role in her hiring, reviews or pay.

Directors and executives own 9.7% of the stock, most of it the 8.3% that director Pavel Baudiš, the Avast co-founder, holds through PaBa Software. Gen has not said how those shares voted. If they all backed the pay, support among other shareholders was about 33%, and votes for from everyone else came to 25% of the stock. That is less than the 33% that BlackRock, Vanguard, Fidelity and State Street together held at June 30, so some of the largest institutional holders’ shares were not voted for the pay. Their funds largely supported it from 2023 through 2025. Shareholders may ask the board whom it will meet now, how much of the stock they hold, and what it will report back.

4. What will the pay committee change?

Denzel, a director since 2019, has chaired the committee, which Gen calls its Compensation and Leadership Development Committee, since Peter Feld left the board in May 2025. She chaired it at last year’s vote and when the board approved the one-time award. Her support fell to 88% from 97.9%, the lowest of the nine directors, all re-elected; the other members, Sue Barsamian and Emily Heath, got 96.9% and 98.7%. Compensia advises the committee. Shareholders may ask what the committee will do differently in fiscal 2027, and whether the board plans changes to its membership.

5. Will the board revisit combining the chair and CEO roles?

In 2021 a proposal asking for an independent chair passed with 51.7% of the votes cast; the board had historically kept the roles separate. When independent chair Frank Dangeard resigned for health reasons in July 2025, the board combined the roles under Pilette, citing the MoneyLion transformation. It amended its guidelines to give itself “the necessary flexibility” on leadership and named Barsamian lead independent director with expanded duties; she also sits on the pay committee. Pilette was re-elected with 94.8% in 2025 and 95.1% this year. Shareholders may ask whether the board will separate the roles again, and what part the lead independent director played in setting this year’s pay.

Our view

A 40.6% vote is a plain rejection. Gen’s pay won 93.3% a year ago, and the holders it met afterward raised no concerns, the company said. Once the award’s full terms and the rest of the fiscal 2026 package were public, most of the votes cast opposed it. If insiders voted for the pay, only about a third of other shareholders’ votes did.

The board’s response should start with the award. Because its goals count acquired revenue, the first tier is within reach on Gen’s current forecast, and the tiers that double or triple the payout are likely to depend on deals. In our view, that makes the award as much a capital-allocation question as a pay question. The board should say what it will change before the 2027 proxy, not in it.

Shareholders rejected the pay but re-elected every director who set it, the lowest with 88%. Say-on-pay is advisory and director elections are binding, so in our view the votes on the directors responsible for pay carry more weight. The board also combined the chair and CEO roles almost four years after a majority of votes cast backed an independent chair, and the lead independent director sits on the pay committee; with pay now rejected, that choice deserves a fresh look. Boardroom Alpha’s Activist Risk Score for Gen is 77 / 100, and directors are elected every year, so the 2027 meeting will be the first vote on how the board responded.

Counterpoints

• Results beat guidance. Gen raised its fiscal 2026 forecast three times; revenue of $5 billion topped every range, starting at $4.7 billion to $4.8 billion, and adjusted earnings per share of $2.56 matched the top of the final range. On August 6 it raised its fiscal 2027 forecast.
• For executives who stay, the award pays only if revenue grows. It pays nothing below $6 billion, needs stock returns in the top quarter of the Nasdaq Composite to reach its maximum, and vests only after fiscal 2030. The proxy says the goals were “intended to account for potential strategic transactions.” The company puts the realizable value of Pilette’s fiscal 2026 pay at 34% of target, and its “compensation actually paid,” the SEC’s pay-versus-performance measure, at 40% of the reported figure.
• The committee has used discretion, and a past mega-grant paid nothing. It cut the fiscal 2026 bonus to 135% of target from a formula result of 156%, and the 2022 Value Creation Program paid nothing because the stock never reached $35.
• Gen has beaten its pay peers over longer periods. Its total return trailed the S&P 500 over one, three and five years but beat the median of its proxy peer group over three and five.
• The stock has recovered. From the last close of the fiscal year, April 2, to September 11, its total return was +62%, against +17% for the S&P 500.
• Cash has gone back to shareholders. Gen bought back $634 million of stock in fiscal 2026 and pays a $0.50 annual dividend.

What to watch

• Ongoing
  Any 8-K on pay, the pay committee or board leadership, and further investor vote disclosures.
• Early November
  Second-quarter results, if the company follows last year’s timing.
• Late July 2027
  The 2027 proxy: how the committee responded to this vote, whom it met, and any change to VCP II.
• Aug. 31, 2027
  Form N-PX filings show how each US fund voted at this meeting.
• September 2027
  Annual meeting, if prior years’ timing holds, with say-on-pay and all nine directors on the ballot.

Sources: Gen’s SEC filings as linked, investors’ published votes, Form N-PX and Boardroom Alpha data, as of September 11, 2026. Returns are total returns compared with the S&P 500. Boardroom Alpha is an independent research and analytics company and does not invest. This brief is for information only and is not investment advice or a proxy solicitation.