For Immediate Release
Tuesday, January 27, 2009
AFSCME Employees Pension Plan Announces 2009 Shareholder Proposals
In the Wake of Financial Crisis, Executive Pay, Board Reform, Corporate Accountability Top Pension Plan AgendaWashington, DC —
The American Federation of State, County and Municipal Employees (AFSCME) Employees Pension Plan (“the AFSCME Plan”), today announced its 2009 shareholder program to foster greater director accountability and reasonable executive compensation.
The AFSCME Plan — an institutional shareholder with more than $850 million in assets — has submitted 36 shareholder proxy proposals for consideration at annual company meetings this spring. In an effort to bolster director accountability, the AFSCME Plan has filed proposals seeking advisory shareholder votes on executive compensation and a system for recouping expenses in proxy contests that do not seek board control.
“The failure of boards to properly assess risk, coupled with an emphasis on short term results that produced sky high pay for executives has left us in the worst financial mess since the Great Depression,” said AFSCME President Gerald W. McEntee. “These proposals will encourage corporate executives to avoid the type of short-term decision-making that has wreaked havoc upon our financial markets.”
New proposals submitted this year to promote more effective executive compensation include a bonus banking proposal that requires the majority of bonuses to be held in escrow for three years, paid out one third each year based on continuous achievement of performance objectives. In addition, a “hold through retirement” proposal requires executives to retain a significant percentage of shares acquired through equity compensation programs for two years past their termination of employment with a company.
Proposals have been filed at: Abercrombie & Fitch (ANF); Allstate (ALL); American International Group (AIG); Ameriprise Financial (AMP); Apple (AAPL); Bank of America (BAC); Bank of New York Mellon (BK); Charles Schwab (SCHW); Citigroup (C); ConocoPhillips (COP); CVS Caremark (CVS); Danaher (DHR); Dow Chemical (DOW); E*TRADE Financial (ETFC); Equifax (EFX); General Dynamics (GD); Honeywell (HON); Huntington Bancshares (HBAN); Ingersoll-Rand (IR); IntercontinentalExchange (ICE); JPMorgan Chase (JPM); Macy’s (M); Moody’s (MCO); Morgan Stanley (MS); Nabors (NBR); Northrop Grumman (NOC); Occidental Petroleum (OXY); Office Depot (ODP); Raytheon (RTN); Safeway (SWY); Tenet Healthcare (THC); Textron (TXT); Valero Energy (VLO); Vulcan Materials (VMC); Wachovia (WB); and Walt Disney Company (DIS).
Anti Gross-ups Policy:
Tax gross-ups are reimbursements for senior executives paid by the company to cover executive’s tax liability on perks and other benefits that can potentially cost shareholders millions. This proposal asks for a policy where executives are not provided any tax gross-up payments that are not available to other managers. Proposals have been refiled at CVS Caremark, Nabors, Northrop Grumman and Textron, and a first time proposal has been filed at Honeywell.
A proposal seeking the annual election of directors has been refiled at Equifax.
Majority Vote Standard:
The AFSCME Plan submitted resolutions to require that directors be seated only if they receive the support of a majority of shareholders at Huntington Bancshares and Tenet Healthcare.
Say on Pay:
In 2006, the AFSCME Plan was the original investor to file proposals asking for annual shareholder approval of executive compensation in U.S. markets. The AFSCME Plan has resubmitted “say on pay” proposals at Allstate, Apple, Bank of New York Mellon, Citigroup, ConocoPhillips, Morgan Stanley, Raytheon and Wachovia, and submitted a first time proposal at Ameriprise Financial.
Currently, in a proxy contest, management can use the company treasury to campaign in support of the candidate nominated by the incumbent board, while shareholders who nominate a candidate must bear the cost of a solicitation themselves, even if their candidate wins. The AFSCME Plan resolution proposes that shareholders who nominate a short slate of candidates for fewer than half of the seats on the board be allowed to recoup their solicitation costs from the company should one or more of their nominated candidates win a seat. This proposal has been filed at Office Depot.
Holding Equity Shares until Two Years Past Retirement:
Most corporations provide their executives with equity as part of compensation packages, but do not require their executives to hold on to any meaningful portion of this equity. To bolster the alignment of management and shareholder interests, this proposal asks that executives retain a significant percentage of shares acquired through equity compensation programs for two years past their termination of employment. Proposals have been filed at American International Group, Bank of America, Danaher, Dow Chemical, IntercontinentalExchange, Macy’s, Moody’s, Occidental Petroleum, Valero Energy and Vulcan Materials.
As the turmoil in the market demonstrates, bonuses can be paid out for results that are based on short term results, results that can ultimately prove to be illusory. This is a new proposal designed to foster long-term focus by asking companies to not pay out short term bonuses until that performance has maintained a period of time, to avoid the possibility of rewarding executives just prior to a collapse in performance. Proposals have been filed at Charles Schwab, E*Trade and JPMorgan Chase.
Some executives receive provision for continued payments even after they die. These provisions known as “golden coffins” commit companies to pay out significant compensation that is unrelated to performance after the death of a CEO. This proposal asks companies not to provide golden coffin benefits if they are not available to other managers. Proposals have been filed at Abercrombie & Fitch, General Dynamics, Safeway and Walt Disney.