For Immediate Release
Thursday, January 24, 2008
Institutional Investors Continue to Press Companies for an Advisory Vote on Executive Pay
Shareholder resolutions filed with over 90 companies by over 70 institutional and individual investors
WASHINGTON, D.C. —A diverse network of institutional and individual investors today announced the filing of shareholder resolutions at over 90 U.S. corporations as part of 2008 proxy season efforts to press companies to give shareowners an advisory vote on executive compensation packages.
The unique investor network started in 2007 - comprised of public pension funds, labor funds, asset managers, individual investors, foundations and religious investors, who are members of the Interfaith Center on Corporate Responsibility (ICCR) - is organized by the American Federation of State, County and Municipal Employees’ (AFSCME) Employees Pension Plan and Walden Asset Management.
The investor proponents are seeking a management sponsored non-binding advisory vote on executive compensation presented in the annual proxy statement. The resolution was submitted at a wide range of companies, including those where pay has been excessive or where there has been a perceived misalignment between pay and performance over the past three to five years, including Abbott Laboratories, Bear Stearns, Blockbuster, Capital One, Citigroup, Coca-Cola, Countrywide Financial, Lexmark, Merrill Lynch, Morgan Stanley, Motorola, Northrop Grumman, and Wells Fargo
“Shareholders want CEOs to be paid for their long-term performance,” said AFSCME President Gerald W. McEntee. AFSCME’s 1.4 million members participate in public pension funds with combined assets worth more than $1 trillion. “We are in the middle of a sub-prime mortgage crisis where some failing CEOs are walking away with hundreds of millions of dollars. That makes no sense, and we think giving shareholders a vote on CEO pay will help to stop it.”
“The experience of institutional investors in the UK is that advisory votes are extremely useful means of engaging companies on the issue of executive pay,” said Timothy Smith, senior vice president at Walden Asset Management. “We’re pleased that a number of companies in the United States already have responded and their Boards have agreed to study how an advisory vote on executive pay might be implemented. Having an advisory vote establishes a solid foundation for a useful dialogue with shareowners. Thus we are hopeful more companies will embrace this form of engagement with their owners.”
The 2008 set of resolutions follows an active 2007 engagement season when a number of investors and companies created a Working Group on the Advisory Vote on Executive Compensation to study how this approach could be put into effect in the U.S. market. Over 20 companies and investors serve on this Working Group. The Working Group sponsored a Roundtable on the issue in July which brought together over 125 companies and investors to delve into the issue. A number of company’s boards have the issue on their agenda and are seeking the input of interested investors.
A similar resolution was filed at more than 50 companies in 2007 and averaged more than 42 percent support - including eight companies where the proposal received over 50 percent of the vote.
“This proposal has generated unprecedented shareholder support. Shareholders expect compensation committees to establish appropriate measures that tie executive pay to company performance,” said Connecticut Treasurer Denise L. Nappier. “The fact that ‘Say on Pay’ got such substantial support for a second straight year shows the continuing high level of concern among investors about executive pay issues such as runaway executive pay unrelated to the creation of shareholder value.”
A number of companies have responded to the controversy around compensation and expanded their communications outreach to investors to better interpret their compensation philosophy, metrics and compensation report and to seek investor feedback. “We appreciate this new wave of communication to investors around compensation,” stated Russell Read, Chief Investment Officer of CalPERS. “However, to make this a two way street, investors need to have a clear opportunity not just for private conversation, but for public feedback on compensation packages. Thus we are urging that expanded communication be connected to a new accountability to shareowners through the Advisory Vote.”
“Shareholder say on CEO pay will be an overriding issue of the 2008 proxy season,” stated New York City Comptroller William C. Thompson, Jr. “This deluge of resolutions and high shareholder votes demonstrates broad support for new accountability in the way top U.S. executives are compensated. While the SEC has instituted new rules for expanding disclosure of executive compensation, it has indicated that it is ‘up to the markets’ to use that information to provide checks and balances. The markets – and investors - are sending a clear message that reform is crucial at this time.”
The vast majority of shareholder resolutions will be voted upon this spring during 2008 stockholder meetings.
Additional filings at major companies include Apple, AT&T, Exxon Mobil, General Electric, Goldman Sachs, Home Depot, IBM, JPMorgan Chase, Merck, Nabors, UnitedHealth, Wachovia and Wal-Mart.
A copy of a sample proposal, a list of companies receiving the proposal, and a list of proponents are available for download here (92k PDF).
