Investors push 90 companies for say on CEO pay
By Joseph A. Giannone
NEW YORK (Reuters) - U.S. CEO pay packages will come under greater fire at annual meetings in the next few months as more than 90 U.S. corporations face resolutions from stockholders battered by the credit crunch and economic slowdown.
The targets are companies that overpaid their executives, or where pay is deemed out of line with performance over the past three to five years, according to a network for more than 70 institutional and individual investors on Thursday.
The network, organized last year by the American Federation of State, County and Municipal Employees and Walden Asset Management, wants companies to sponsor "say on pay" resolutions in proxy statements for upcoming annual meetings.
Typically, shareholders submit resolutions in December and January for annual meetings that take place in the spring.
"We are in the middle of a subprime mortgage crisis where some failing CEOs are walking away with hundreds of millions of dollars. That makes no sense, and we think giving shareholders a vote on CEO pay will help to stop it," AFSCME President Gerald McEntee said. AFSCME members participate in pensions managing more than $1 trillion in assets.
Companies receiving resolutions include Abbott Laboratories (ABT.N), Bear Stearns Cos BSC.N, Blockbuster (BBI.N), Capital One Financial Corp (COF.N), Citigroup Inc (C.N), Coca-Cola (KO.N), Countrywide Financial CFC.N, Lexmark (LXK.N), Merrill Lynch & Co MER.N, Morgan Stanley (MS.N), Motorola (MOT.N), Northrop Grumman (NOC.N) and Wells Fargo & Co (WFC.N).
Similar resolutions were filed last year at more than 50 companies. On average they received more than 42 percent shareholder support, AFSCME said.
The investor group also filed "say on pay" resolutions with Apple (AAPL.O), AT&T (T.N), Exxon Mobil (XOM.N), General Electric (GE.N), Goldman Sachs Group Inc (GS.N), Home Depot (HD.N), IBM (IBM.N), JPMorgan Chase & Co (JPM.N), Merck (MRK.N), Nabors Industries Ltd (NBR.N), UnitedHealth (UNH.N), Wachovia Corp WB.N and Wal-Mart Stores Inc (WMT.N).
The union group also told Reuters that in addition to seeking a voice on executive pay, it is taking aim for the first time at several other perks not available to the average worker and practices that reduce accountability.
One such perk is the "tax gross up" policy, where companies reimburse executives for taxes paid on other compensation. These pacts can cost millions of dollars, AFSCME said.
"It's abhorrent to have a CEO not paying taxes on their golf club memberships. What makes them so special?" said Rich Ferlauto, AFSCME's director of corporate governance and pension investment.
AFSCME also seeks reforms of "10b5-1" plans, preset stock-trading plans designed to stop insider trading abuses. The union is asking companies to tighten provisions around these plans to ensure they are not manipulated by CEOs.
The group also seeks improvements to the compensation discussion included in proxies. A format introduced last year was supposed to make it easier to measure and compare CEO pay, but Ferlauto said these discussions need improvement.
"Right now it's a compliance document for outside lawyers, not a resource for shareholders. It should be a narrative to describe how a pay package was designed to increase shareholder value," Ferlauto said.
(Reporting by Joseph A. Giannone, editing by Richard Chang, Gary Hill)
