UPDATE 2-Toll investors asked to vote no on CEO cash bonus
(Recasts first paragraph, adds Toll Brothers comment, ISS recommendation, byline)
By Ilaina Jonas
NEW YORK, March 3 (Reuters) - Two shareholder advisory companies on Monday urged Toll Brothers Inc (TOL.N) investors to vote "no" to a cash bonus plan for its CEO, saying it would enhance his pay at a time when the company's stock is down because of the U.S. housing market downturn.
"It appears that the company has introduced this proposal as a way to ensure that (Robert) Toll receives a cash incentive even when company performance is suffering," Proxy Governance Inc said in a report.
The bonus plan is limited to Chairman and Chief Executive Robert Toll and capped at $25 million a year, the report said.
It seeks to ensure that bonuses to executive officers would be considered qualified performance-based compensation and would be fully deductible to the company for federal tax purposes, according to the report.
"We have just received the comments from Proxy Governance, and we are reviewing them," Toll Brothers said in a statement.
Robert Toll received no bonus in fiscal 2007. However, in fiscal 2006 he received $17 million and in fiscal 2005 he got a cash incentive of $27.3 million, Proxy Governance said.
Robert Toll's average three-year compensation is 265 percent above the median paid to CEOs at peer companies, Proxy Governance said.
"Given such compensation history, we recommend that shareholders vote against this plan," the report said.
ISS Governance Services, a unit of RiskMetrics Group (RMG.N), advised investors to vote against the executive incentive bonus plan, which would replace another plan.
"While the existing bonus plan has certain design flaws, it is in some ways more performance oriented compared to the proposed new plan, which permits substantial payouts on the basis of a percentage of revenue and achievement of undisclosed goals," the ISS report said.
ISS also advised shareholders to withhold their votes for reelection of Robert Toll, Vice-Chairman Bruce Toll and Chief Financial Officer Joel Rassman to the board for failing to submit the company's poison pill it adopted in June to a shareholder vote.
ISS also recommended that shareholders vote against a proposal that would allow the company to re-price stock options for nonexecutive officers and board members. The plan was designed to retain employees whose stock options call for an exercise price that is 25 percent or more higher than the current stock price.
ISS said that an option exchange program may be premature as the U.S. housing market is expected to decline further and the stock's price has been too volatile.
Shares of Toll Brothers closed down 62 cents at $20.59 on the New York Stock Exchange. Shares traded as high as $31.14 in May 2007 and as low as $15.49 in January. (Reporting by Ilaina Jonas, editing by Maureen Bavdek, Toni Reinhold)
