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Raytheon 2006RESOLVED: The stockholders of the Raytheon Company (“Raytheon” or the “Company”) urge the Board of Directors (the “Board”) to seek stockholder approval for future severance agreements with senior executives that provide benefits in an amount equal to or exceeding 2.99 times the sum of the executive’s base salary plus bonus. “Future severance agreements” include employment agreements containing severance provisions; retirement agreements; change in control agreements; and agreements renewing, modifying or extending existing such agreements. “Benefits” include lump-sum cash payments (including payments in lieu of medical and other benefits) and the estimated present value of periodic retirement payments, fringe benefits and consulting fees (including reimbursable expenses) to be paid to the executive.
SUPPORTING STATEMENTRaytheon has entered into several agreements that provide severance compensation to certain senior executives in the event of their termination following a change in control. Under these agreements, commonly known as “golden parachutes,” executives will receive severance packages consisting of three times an executive’s current compensation (including base salary plus targeted bonus) and additional benefits including welfare, benefit and retirement plans. Even if there is no change in control, Chairman and CEO William Swanson is entitled to receive his severance package if he is terminated for any reason except for cause, death or disability. Because he is already eligible to receive substantial retirement income at Company expense, we believe any additional severance payments are redundant and unnecessary. In our opinion, golden parachute severance agreements are one component of excessive executive compensation. In the event of a change in control, we are concerned that the potential cost of these agreements may reduce the value ultimately received by stockholders. Moreover, we believe that golden parachutes may reward underperformance leading up to a change in control and are unnecessary given the high levels of executive compensation at our Company. We believe that requiring stockholder approval of such agreements may have the beneficial effect of insulating the Board of Directors from manipulation when the parties negotiate such agreements. Because it is not always practical to obtain prior stockholder approval, the Company would have the option, if it implemented this proposal, of seeking approval after the material terms of the agreement were agreed upon. In our opinion, the potentially significant costs of these severance agreements merit stockholder review. Institutional investors such as the California Public Employees Retirement System recommend stockholder approval of these types of agreements in its proxy voting guidelines. The Council of Institutional Investors favors stockholder approval if the amount payable exceeds 200% of the senior executive’s annual base salary. We urge stockholders to vote FOR this proposal.
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Sheila Hill
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