Issues

Emerson 2006

     RESOLVED, that stockholders of Emerson Electric Co. (“Emerson” or the “Company”) urge the Compensation and Human Resources Committee of the Board of Directors (the “Board”) to establish a policy to seek stockholder approval for future severance agreements with senior executives that provide benefits in an amount exceeding 2.99 times the sum of the executive’s base salary plus bonus. “Future severance agreements” mean employment agreements containing severance provisions; change of control agreements; retirement agreements; and agreements renewing, modifying or extending existing such agreements. “Benefits” include lump-sum cash payments; and the estimated present value of periodic retirement payments, fringe benefits, perquisites, consulting fees and other amounts to be paid to the executive after or in connection with termination of employment.

 

SUPPORTING STATEMENT

 

     Current Emerson Chairman and CEO David Farr has no employment agreement with the Company.  In our opinion, the absence of an agreement setting forth the severance compensation payable to Mr. Farr could expose the Board to pressure if it needed to effect an involuntary termination.  A policy like the one urged in this proposal would permit severance payouts exceeding the threshold described above, but only if Emerson’s stockholders approved the arrangements as being in the Company’s best interests. 

     The arrangements entered into with Emerson former Chairman and CEO Charles Knight, who resigned as a Company employee on September 17, 2004, reinforces our belief that a policy on severance payments would be in the interests of Emerson stockholders.  Mr. Knight’s employment agreement entitled him to post-employment compensation that we believe is excessive and not in the interest of stockholders. 

     The agreement provides that Mr. Knight will “continue to have access to Company facilities and services on the same basis as during his employment, including the Company’s aircraft, car, driver, security, financial planning and club memberships, the estimated annual value of which is less than $200,000.”  (2004 Emerson proxy statement)  These perquisites extend through 2019.

     Corporate governance experts and leading institutional investors favor severance approval policies like the one we advocate in this proposal.  The Council of Institutional Investors, a trade association of pension funds with over $3 trillion in assets, states that stockholders should approve all agreements “providing for severance, change-in-control or other special payments to executives exceeding 2.99 times average annual salary plus annual bonus for the previous three years.”  (See http://www.cii.org/policies/compensation/emp_contracts.htm)  Institutional Shareholder Services, the nation’s largest proxy voting advisor, also favors stockholder ratification, as long as prior approval is not required.  (See http://www.issproxy.com/governance/publications/2005archived/006.jsp)
 
     We urge stockholders 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."