U.S. union group calls for
corporate pay reforms
Tue Jan 27, 2009
By Martha Graybow
NEW YORK, Jan 27 (Reuters) - An activist
U.S. pension fund on Tuesday demanded changes in how Corporate America
rewards its leaders, including a call for companies to stop paying bonuses
based on short-term results that may turn out to be unsustainable.
Executive pay is expected to be a hot topic
at corporate annual meetings this year amid public anger over the economic
downturn, widespread employee layoffs and the government's $700 billion
Most companies hold their annual gatherings
in the spring, when shareholders have an opportunity to vote on ballot
initiatives that deal with how corporations are run.
The American Federation of State, County
and Municipal Employees (AFSCME) Employees Pension Plan said it had
submitted 36 stockholder proposals for consideration at companies including
American International Group Inc (AIG.N),
Citigroup Inc (C.N)
and Walt Disney Co (DIS.N)
this year. Many of its proposals focus on pay issues.
"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 McEntee. "These proposals will
encourage corporate executives to avoid the type of short-term decision
making that has wreaked havoc upon our financial markets."
The AFSCME pension plan manages about $850
million in assets for its union retirees around the United States.
Among its new proposals this year is one
calling for the majority of bonuses for top corporate executives to be held
in escrow for three years rather than paid out immediately, a measure it
says is aimed at discouraging short-term risk-taking by company chiefs to
meet their annual bonus targets.
The idea grew out of the executive pay
rules that the U.S. government has imposed on companies accepting federal
bailout money, said AFSCME Director of Corporate Governance and Pension
Investment Richard Ferlauto.
The proposal, submitted to Charles Schwab
E*Trade Financial Corp (ETFC.O)
and JPMorgan Chase & Co (JPM.N)
for shareholder votes, calls for executive bonuses to be distributed in
installments, with one-third of the total to be paid annually as long as
performance objectives are reached, AFSCME said.
AFSCME also has submitted a proposal
requiring executives to retain a large portion of company stock they are
awarded for at least two years after they stop working for the company.
The proposal was filed at companies
including AIG, Bank of America Corp (BAC.N)
and Dow Chemical Co (DOW.N),
AFSCME also said it had resubmitted
proposals calling for nonbinding annual shareholder votes on executive pay
-- known as "say-on-pay" votes -- at companies including Apple Inc (AAPL.O),
Bank of New York Mellon Corp (BK.N)
The group is also targeting payments
awarded to company chiefs after their deaths -- benefits dubbed "golden
It said it has submitted proposals to end
these payouts, unless the companies agree to extend the death benefits to
other managers at Abercrombie & Fitch Co (ANF.N),
General Dynamics Corp (GD.N),
Safeway Inc (SWY.N)
It is not certain that all of the measures
will appear on shareholder ballots. Companies and shareholder groups
sometimes reach compromises, and the measures are withdrawn.
Occidental Petroleum Corp (OXY.N)
said on Monday its board had adopted a say-on-pay policy on executive pay,
starting in 2010. AFSCME and other shareholders subsequently withdrew their
proposals calling for such annual votes.
(Reporting by Martha Graybow;
editing by Jeffrey Benkoe)
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