Issues

Amgen 2006

     RESOLVED, that stockholders of Amgen Inc. (“Amgen”) urge the Compensation and Management Development Committee of the Board of Directors (the “Committee”) to adopt a policy requiring that senior executives retain a significant percentage of shares acquired through equity compensation programs during their employment, and to report to stockholders regarding the policy before Amgen’s 2007 annual meeting of stockholders.  The Committee should define “significant” (and provide for exceptions in extraordinary circumstances) by taking into account the needs and constraints of Amgen and its senior executives; however, stockholders recommend that the Committee not adopt a percentage lower than 75% of net after tax shares.  The policy should address the permissibility of transactions such as hedging transactions which are not sales but reduce the risk of loss to the executive.

 

SUPPORTING STATEMENT

 

     Equity-based compensation makes up a substantial portion of senior executive compensation at Amgen.  During fiscal year 2004, Chairman, CEO and President Kevin Sharer received $4,963,954 in salary and bonus, while the stock options he received had a potential future value of $5,448,225 or $12,696,681, depending on the return assumption.  During that year, Executive Vice President Dennis Fenton received $1,977,755 in salary and bonus, while receiving restricted stock with a value of $1,257,198 and 75,000 options. For the fiscal years 2000 through 2004, Sharer was granted 3,025,000 options and Fenton received 708,800.

     Amgen claims that option grants allow executives to share, along with stockholders, in the long-term performance of the Company.  Amgen also touts its Stock Ownership Guidelines (the “Guidelines”), which require executives to hold an amount of stock equal to a specified multiple of base salary (five times base salary, in the case of the CEO), as promoting alignment of executive and stockholder interests.  Despite generous equity compensation programs and the adoption of the Guidelines in 2002, neither Sharer nor Fenton currently owns any shares of Amgen stock outright, according to Amgen’s proxy statement for the 2005 annual meeting.  (Compliance with the Guidelines is not required until five years after they were adopted or five years after the executive becomes subject to them.)

     We believe that a retention ratio like the one urged in this proposal serves stockholder interests better than a stock ownership requirement like the Guidelines.  A retention ratio would ensure that the dilution of stockholders’ interests resulting from equity compensation is counterbalanced by increasing executive ownership and alignment.  At the same time, a retention ratio provides more flexibility for executives than a stock ownership requirement in the event of a slump in Amgen’s stock price.  A 2003 article by compensation consultants Towers Perrin criticized ownership requirements on this ground and suggested the use of a retention ratio instead.  (http://www.boardmember.com/network/index.pl?section=1038&article_id=11391&show=article)  Similarly, compensation consultant Frederic Cook has stated that “the advantages of the retention ratio make it more attractive than the multiple-of-salary approach for structuring stock ownership guidelines.”  (http://www.fwcook.com/alert_letters/7-25-02RetentionRatioOwnershipGuideline.pdf)

     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."