Engine Capital takes a shot at AECOM, asserting mismanagement and excessive compensation

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east side access
East Side Access: Starting point for the four Queens tunnels under Sunnyside Yard. The top three tunnels (Tunnels A, B/C, and D, from left to right) will connect to the LIRR Main Line, while the bottom tunnel will connect to storage and maintenance tracks (Wikipedia)

An investment firm is attacking the management of AECOM, one of New York’s largest construction businesses.

Engine Capital released a letter earlier Feb. 12 attacking AECOM’s board of directors, senior executives and chairman and CEO Michael Burke, who it says has reaped tens of millions of dollars at the helm of the $5 billion company even as its share price has dipped, Crain’s New York Business reports.

The Manhattan-based activist shareholder firm says it wants other stock owners to block the re-election of sitting members of AECOM’s board at a March 6 meeting.

Los Angeles-headquartered AECOM works the design, engineering and construction of several large projects in the area, including the East Side Access and a flood protection system to ring Lower Manhattan.

The company recently removed its New York management team, including former Port Authority executive director Chris Ward and other local executives, consolidating management in its Boston office.

Engine Capital’s open letter asserts that changes are needed at the top, observing that Burke has earned nearly $80 million since taking over as AECOM’s chief in 2014, including $15.6 million last year.
Meanwhile, the company’s shares have declined 9 percent even as the S&P 500 has increased 44 percent. Engine Capital also observes that five other executive officers earned $28.5 million in compensation last year despite the stock’s slide, and Burke has enjoyed other lavish perks, such as exclusively flying on private planes.
“Rarely have we seen such a transfer of wealth from shareholders to management for such poor performance,” Engine Capital said in its letter. “Clearly the status quo is completely unacceptable.”
Engine Capital says the company’s board has allowed senior executives to meet cushy performance targets to trigger portions of their compensation.  The investment firm claimed that  that board members receive higher-than-average salaries of $300,000 a year and have “no relevant construction, engineering or design experience, and very little government services experience … which again makes it difficult for the board to provide effective oversight.”
AECOM declined to comment to Crain’s about the Engine Capital letter.

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