For Immediate Release
Wednesday, April 20, 2005
AFSCME Employees Pension Plan Releases a List of "No Vote" Companies for 2005 Annual Meetings
Washington —The AFSCME Employees Pension Plan today released a list of eleven companies for which it will be withholding votes from specific directors during annual shareholder meetings in the coming weeks. The No Votes are based on current AFSCME proxy voting guidelines for annual meetings this year.
"We intend to send a message to those directors who are not responsive to the needs of shareholders — if you are not doing your job as a board member by representing the interests investors, you will not get our vote," said AFSCME Pension Plan Chair Gerald W. McEntee.
The Pension Plan will withhold votes from directors who have supported excessive executive pay that did not match company performance, directors who have significant conflicts of interest or serve on too many boards, and directors of companies that continue to ignore majority shareholder votes.
McEntee added, "Its good practice for institutional investors to disclose their no votes when directors are failing shareholders. And going forward we are putting company directors on notice that they will be the focus of our corporate governance efforts. "
Companies with directors targeted by the AFSCME Pension Plan include: Honeywell (NYSE: HON), Cendant (NYSE: CD), VF Corp. (NYSE: VFC), General Electric (NYSE: GE), Kohls Corp. (NYSE: KSS), Colgate-Palmolive (NYSE: CL), Union Pacific (NYSE: UNP), Qwest (NYSE: Q), Hilton Hotel Corp. (NYSE: HLT), Home Depot (NYSE: HD), and Lowes Companies (NYSE: LOW).
The AFSCME Employees Pension Plan is an institutional shareholder activist with more than $700 million in assets.
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AFSCME Employees Pension Plan Withhold Votes
Honeywell (HON) 4/25/05
In 2004, Chairman CEO David M. Cote saw his pay increase 38 percent, to $17.4 million, from $12.6 million in 2003 — even though net income declined 3 percent, and Honeywell shares trailed their peers for the year. According to its proxy, Honeywell has underperformed its peers over the last five years. When hired in 2002, Cote received a golden hello valued at close to $60 million. Based on failure to pay for performance, we will withhold votes from Management Development and Compensation Committee Chairman John Stafford.
Cendant (CD) 4/26/05
Cendants Compensation Committee has a long history of overpaying Chairman and CEO Henry Silverman. Silverman received in excess of $100 million over the last five years despite sideways market performance. He holds over 33,000,000 options with an estimated value in excess of $319 million. In 2005, he received $165,013 for the reimbursement of legal fees (and taxes on such reimbursement) incurred in connection with the negotiation of his employment agreement. Due to a history of excessive pay by the Compensation Committee, we are withholding votes from Compensation Committee Chairman Robert Smith.
VF Corp. (VFC) 4/26/05
The VF Corp. board ignored majority votes in favor of board declassification in 2002, 2003, and 2004. We will withhold votes from directors Juan Ernesto Bedout, Ursula Fairbairn, Barbara Feigin and Mackey McDonald for failure to declassify the board.
General Electric (GE) 4/27/05
Board member Claudio Gonzalez is the chairman and CEO at Kimberly-Clark de Mexico and is listed as a director at America Movil, Home Depot, Inc., Kellogg Company and Kimberly-Clark for a total of five active board memberships while serving as an executive. Because of the demands placed upon board members, we do not support directors who serve on an excessive number of boards while at the same time serving as an executive. We will withhold votes from Claudio Gonzalez for serving on too many boards.
Kohls Corp. (KSS) 4/27/05
The Kohls board is non-independent, as seven of 13 directors have ties to the company. These seven comprise three executives, three former executives, and another whose law firm provides services to Kohls. Because of the non-independent board, we will withhold our votes from the non-independent director nominees, in this case retired Chairman and CEO William Kellogg and COO Arlene Meier.
Colgate-Palmolive (CL) 5/4/05
In 2004, Chairman and CEO Reuben Mark was ranked the highest paid executive on the Forbes CEO earnings list, with a reported compensation of $148 million. The companys most recent proxy shows that Mark was given over $13 million in restricted stock for 2004. One hundred dollars invested in Colgate-Palmolive on 12/31/99 was worth $85 dollars as of 12/31/04, while the same amount invested in its peers was worth $124. Although the companys performance has been mixed, Marks pay has been far above average. Due to this disconnect between pay and performance, we will withhold votes from compensation committee members Jill Conway, Ellen Hancock, Ronald Ferguson, David Johnson, Richard Kogan, and Delano Lewis.
Union Pacific (UNP) 5/5/05
The past work of the compensation committee at Union Pacific raises questions about the committees role in setting fair pay rewards. In 2001, Union Pacific's board approved an incentive pay program that would grant cash and stock at the end of a three-year period. The awards would be granted, the program stated, if the company's stock traded above $70 for 20 days in a row or if company earnings for the period totaled at least $13.50 a share. In late 2003, it became clear that the company might miss both targets. The compensation committee chose to include the sale proceeds from spinning off the Overnite Corporation in the earnings computation, which in turn put the executives over the top for the cash and stock awards. What makes this maneuver unusual is that proceeds from a sale are not typically included in earnings. For 2003, Chairman and CEO Richard Davidson, Union Pacific's chief executive, received $9.5 million in salary, long-term incentive pay and other compensation as well as $4.5 million in restricted stock and 325,000 options. Because the members of the compensation committee have failed in their duty to Union Pacific stockholders as a result of the questionable earnings computation, we will withhold votes from long time directors and compensation committee members Thomas Donohue, Spencer Eccles, and Stephen Rogel.
Qwest (Q) 5/24/05
According to the 2005 proxy, $100 invested in Qwest on 12/31/99 was worth $10.34 as of 12/31/04, while the same amount invested in its peers was $46.08. Additionally, the stocks performance has been flat for the past year. And yet Chairman and CEO Richard Notebaert received an increased bonus of $2,970,000 for 2004. The Qwest Board has a checkered compensation history. In naming the worst boards of 2002, BusinessWeek included Qwest, noting "the compensation committee — described as 'comatose' by one expert — awarded ex-CEO Joseph Nacchio an $88 million pay package in 2001, one of the worst years in the company's history." Because of the continuing disconnect between pay and performance, we will withhold votes from director nominee Craig Slater for recent service on Qwests Compensation Committee in addition to his service on the committee in 2001 and 2002.
Hilton Hotel Corp. (HLT) 5/26/05
At Hilton Hotel Corp., fewer than half of all the directors are independent. A review of the proxy reveals that one insider and another six directors who have either worked for Hilton, or engaged in a series of business transactions with the company. Co-Chairman and CEO Stephen Bollenbach is the current insider. Hilton has engaged director Benjamin Lamberts company Eastdil Realty Company to act as its broker for property sales. Hilton has pledged sponsorship of the U.S. Olympic Committee through 2008, where Peter Ueberroth serves as Chairman of the Board. Barron Hilton is former chairman of the board. Hilton has invested $20 million in director Robert Johnsons hotel investment fund. Director David Michels is CEO of Hilton Group plc., which has business transactions with Hilton, and director John Myers is CEO of GE Capital and a trustee of the General Electric Pension Trust, which owns eight properties managed by Hilton. Out of the current five nominees, we are withholding votes from insider Stephen Bollenbach and affiliated outsiders Benjamin Lambert and Peter Ueberroth for serving on a non-independent board. Votes will also be withheld from Ueberroth for his service on the compensation committee and from Lambert and Ueberroth for their service on the nominating committee.
Home Depot (HD) 5/26/05
An investment of $100 in Home Depot on 12/31/99 was worth $74.91 on 12/31/04, while the same amount invested in Home Depots peers was worth $135.02. Despite the share price trailing its peers during that period, pay has been very generous. In 2004, Chairman and CEO Robert Nardelli received compensation in excess of $28 million including nearly $14 million in restricted stock, a reported 19 percent increase from 2003. While company performance has improved, the original pay remains excessive. Due to a lack of pay for performance, we will withhold votes from compensation committee members Bonnie Hill, Richard Brown, John Clendenin, Claudio Gonzalez, Lawrence Johnston, and Roger Penske.
Lowes Companies (LOW) 5/27/05
Lowes Board member Robert Ingram is Vice Chairman of Pharmaceuticals, at GlaxoSmithKline and serves as a director at Allergan, Inc., Edwards Lifesciences Corporation, Misys plc; Nortel Networks Corporation; OSI Pharmaceuticals, Inc., Valeant Pharmaceuticals International, and Wachovia Corporation — nine board memberships while serving as an executive. Because of the demands placed upon board members, we do not support directors who serve on an excessive number of boards while at the same time serving as an executive.
