For Immediate Release
Thursday, January 21, 2010
AFSCME Employees Pension Plan Announces 33 Shareholder Proposals
Plan Focuses on Executive Pay, Board Reform and Corporate AccountabilityWashington, DC —
The American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME) Employees Pension Plan (“the AFSCME Plan”), today announced its 33 proposals to foster greater director accountability and more reasonable executive compensation.
The AFSCME Plan, an institutional shareholder with more than $850 million in assets, has submitted the shareholder proxy proposals for consideration at annual company meetings this spring. The Plan’s proposals are designed to address accountability and transparency, and align the interests of management with those of shareowners.
“Wall Street executives have destroyed trillions of dollars in shareholder value while lining their own pockets,” said AFSCME President Gerald W. McEntee. “Our proposals are designed to make directors accountable and better focused on long-term value creation.”
The AFSCME Plan has filed proposals seeking independent board chairmen, advisory shareholder votes on executive compensation and a system to provide reimbursement for solicitation expenses of successful dissident board candidates. Two additional proposals seek to institute compensation programs that discourage inappropriate risk-taking by executives and provide incentives for longer term value creation. The Plan has filed bonus banking proposals that require the majority of bonuses to be held in escrow for three years and a “hold through retirement” proposal that requires executives to hold the bulk of equity awards until two years past their tenure.
“Our proposals are critical to restoring faith in the markets and beginning the process of recovering from the worst financial mess since the Great Depression,” added McEntee.
Proposals have been filed at: Abercrombie & Fitch (ANF); Aetna (AET); Alcoa (AA); Allstate (ALL); American Express (AXP); Anadarko Petroleum (APC); Bank of America (BAC); BB&T (BBT); Capital One Financial (COF); Charles Schwab (SCHW); Citigroup (C); CVS/Caremark (CVS); Dell (DELL); Dow Chemical (DOW); Eli Lilly (LLY); Fifth Third Bancorp (FITB); Goldman Sachs (GS); Hartford Financial Services Group (HIG); International Business Machines (IBM); JPMorgan Chase (JPM); Lincoln National (LNC); Mylan (MYL); Nabors (NBR); Omnicom Group (OMC); Pulte Homes (PHM); Raytheon (RTN); Regions Financial (RF); Safeway (SWY); SunTrust (STI); Valero Energy (VLO); WellPoint (WLP); Wells Fargo (WFC); and XTO Energy (XTO).
Anti Gross-ups Policy:
Tax gross-ups are reimbursements for senior executives, paid by the company, to cover executives’ 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. A proposal has been refiled at CVS/Caremark, and first-time proposals have been filed at Alcoa and Regions Financial.
Bonuses are paid out for results that are based on short-term results, results that can ultimately prove to be illusory. This proposal is designed to align long-term value creation and bonus incentives by placing a portion of bonuses in escrow accounts to be paid in installments based upon sustained corporate performance, and adjusting the unpaid portion to account for performance during that period. Proposals have been refiled at Charles Schwab and JPMorgan Chase, and first time proposals have been filed at Bank of America, Goldman Sachs, Wells Fargo and XTO Energy.
Some executives receive provisions entitling them to payouts even after they die. These provisions known as “golden coffins” commit companies to pay significant compensation after the death of a CEO. This proposal asks companies not to provide golden coffin benefits if they are not available to other managers. A proposal has been refiled at Safeway.
The role of a board is to monitor management and the chair runs the board. But if the board is led by a chair who is also the CEO, then the CEO effectively becomes his or her own boss. Separating the chair and CEO positions avoids that fundamental conflict of interest. Proposals have been filed at Abercrombie & Fitch, Aetna, BB&T, Fifth Third Bancorp, IBM, Nabors and SunTrust.
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 companies require executives to retain a significant percentage of shares acquired through equity compensation programs for two years past their termination of employment. Proposals have been refiled at Dow Chemical and Valero Energy, and first-time proposals have been filed at American Express, Capital One Financial, Eli Lilly and Mylan.
Reincorporation from Indiana to Delaware:
Indiana Corporate Statutes adopted in 2009 diminish key basic rights of shareowners by weakening standards of care for directors and strengthening anti-takeover provisions through default classified boards. Reincorporation to Delaware, with fewer anti-takeover measures and an established standard of care for directors, would restore these key shareowner rights. Proposals asking for Delaware reincorporation have been filed at WellPoint and Lincoln Financial National.
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 and Raytheon.
Currently, in a proxy contest, management can use the company treasury to campaign in support of a 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. This resolution proposes that shareholders who nominate candidates for fewer than half of the seats on the board and win be reimbursed for their expenses. In the absence of a final Securities and Exchange Commission proxy access rule, solicitation expense reimbursement lowers the cost barriers to entry for short slates contesting less than a majority of board seats in non-control elections. This proposal has been filed at Anadarko Petroleum, Citigroup, Dell, Hartford Financial Services Group, Omnicom Group and Pulte Homes.