Issues

Merrill Lynch 2006

     RESOLVED, that shareholders of Merrill Lynch & Co., Inc. (“Merrill Lynch”)  urge the board of directors to adopt a policy that Merrill Lynch shareholders be given the opportunity at each annual meeting of shareholders to vote on an advisory resolution, to be proposed by Merrill Lynch’s management, to approve the report of the Management Development and Compensation Committee set forth in the proxy statement.  The policy should provide that appropriate disclosures will be made to ensure that shareholders fully understand that the vote is advisory; will not affect any person’s compensation; and will not affect the approval of any compensation-related proposal submitted for a vote of shareholders at the same or any other meeting of shareholders.

 

SUPPORTING STATEMENT

 

     In our view, senior executive compensation at Merrill Lynch has been excessive in recent years.  Although CEO Stanley O’Neal received only $700,000 in salary and no bonus in 2004, he received a restricted award valued at over $31 million.  In 2003, Mr. O’Neal was paid a $13,500,000 bonus, in addition to receiving over $11 million in restricted stock.  Finally, Merrill Lynch discloses compensation to Mr. O’Neal in 2004 valued at $119,395 representing “required” use of the corporate aircraft for personal purposes.

     We believe that the current rules governing senior executive compensation do not give shareholders enough influence over pay practices.  In the United Kingdom, public companies allow shareholders to cast an advisory vote on the “directors remuneration report.” Such a vote isn't binding, but allows shareholders a clear voice which could help reduce excessive pay.  U.S. stock exchange listing standards do require shareholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year.  Shareholders do not have any mechanism for providing ongoing input on the application of those general standards to individual pay packages.  (See Lucian Bebchuk & Jesse Fried, Pay Without Performance 49 (2004)) 

     Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are also broad and do not constrain compensation committees in setting performance targets for particular executives.  Withholding votes from compensation committee members who are standing for reelection is a blunt instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.

     Accordingly, we urge Merrill Lynch’s board to allow shareholders to express their opinion about senior executive compensation practices by establishing an annual referendum process. The results of such a vote would, we think, provide Merrill Lynch with useful information about whether shareholders view the company’s compensation practices, as reported each year in the Management Development and Compensation Committee Report, to be in shareholders’ best interests.

     We urge shareholders to vote for this proposal.


 

Print Version
 

Sheila Hill
Local 1319, Maryland

Sheila Hill

"I've worked hard for my pension, and my union works hard to protect it. We want to ensure that our pension investments keep companies and CEOs honest and our retirement secure."