For IMMEDIATE RELEASE

Thursday, January 25, 2007

Institutional Investors to Press Companies For a Shareowner Vote on Executive Pay

Shareholder resolutions filed with 44 companies seeking to tie CEO pay to corporate performance

WASHINGTON — A diverse network of institutional investors today announced the filing of shareholder resolutions at 44 U.S. corporations as part of an unprecedented push to press companies in the 2007 proxy season to give corporate shareowners an advisory vote on executive compensation packages.

The unique investor network—comprised of public pension funds, labor funds, asset managers, foundations and members of the Interfaith Center on Corporate Responsibility (ICCR)—was organized by the Employees Pension Plan of the American Federation of State, County and Municipal Employees (AFSCME) and Walden Asset Management.

The investors are seeking an annual, non-binding advisory vote on the summary compensation table that every corporate board presents to investors in its yearly proxy statement. The resolution was submitted at companies where pay has been excessive or where there has been a misalignment between pay and performance over the past three to five years, including Affiliated Computer Services, Citigroup, Coca-Cola, Exxon Mobil, Home Depot, Jones Apparel, Merck, Nabors, Pfizer, Qwest, Time Warner, UnitedHealth, and Wal-Mart.

“We are focusing on companies where exorbitant pay has been lavished on CEOs despite a failure to deliver results commensurate with their compensation,” said AFSCME President Gerald W. McEntee, whose union’s 1.4 million members participate in public pension funds with combined assets worth more than $1 trillion. “Far too often, the pay of CEOs is guaranteed regardless of whether the company sinks or swims under their leadership. It is time to give shareowners a way to express their frustration with how boards are dealing with the compensation issue.”

Ninety percent of institutional investors and 61 percent of corporate directors think the current executive compensation system overpays executives, according to recent studies by Watson Wyatt.

“We believe this is an idea whose time has come,” said Timothy Smith, senior vice president at Walden Asset Management. “We’re pleased that a number of companies already have responded positively and agreed to take specific steps to study how an advisory vote on executive pay can be implemented in U.S. markets. We anticipate a number of forward-looking steps in response to this resolution by leading companies that understand shareholder frustration with the present process for creating executive compensation packages.”

Active leaders in the resolution filing include the AFSCME Employees Pension Plan, Walden Asset Management, the New York City Employees’ Retirement System (NYCERS), the AFL-CIO, the Connecticut Retirement Plans and Trust Funds (CRPTF), Hermes Investment Management (U.K.), the Needmor Fund, Amalgamated Bank, Boston Common Asset Management, the Marianists, Bon Secours Health System, the Unitarian Universalist Association and the Benedictine Sisters of Texas.

A similar resolution was filed with a half-dozen companies in 2006 and averaged more than 40 percent support in its first year—including 44 percent support at Sun Microsystems and Countrywide Financial, 43 percent support at Sara Lee, 41 percent at US Bancorp, and 40 percent at Home Depot.

“Shareholders expect compensation committees to establish appropriate measures that tie executive pay to company performance,” said Connecticut Treasurer Denise L. Nappier. “Far too many compensation plans are fashioned in such a way that executives are rewarded regardless of long-term return on investment. An advisory vote gives shareholders the opportunity to let compensation committees know when they’re not making the grade.”

“Institutional investors are fed up with the unbridled excesses of executive compensation in the U.S.,” said New York City Comptroller William Thompson Jr. “Companies in the U.K. and Australia already allow their shareholders to cast advisory votes on the compensation report. It is time for American companies to adopt this important policy for improving transparency and disclosure, and board accountability for executive pay.”

The United Kingdom passed a law in 2002 requiring publicly traded companies to give shareholders an up-or-down advisory vote on executive pay, and the U.K. system has since successfully restrained the growth rate of CEO compensation there.

“It has worked very well in the United Kingdom and has stimulated meaningful discussions between companies and shareowners on the philosophy and metrics related to what goes into top management pay packages,” said Bess Joffe, Manager at Hermes Equity Ownership Services, a United Kingdom-based investment firm and a sponsor of the UnitedHealth Group resolution.

“Shareholder say on CEO pay will be the overriding issue of the 2007 proxy season,” AFSCME’s McEntee said. “This deluge of resolutions demonstrates broad support for changes in the way top U.S. executives are compensated. While the SEC has set up new rules for expanding disclosure of executive compensation, it has said that it is ‘up to the markets’ to use that information to provide checks and balances. Well, this is the market talking. This is investors banding together to demand reform.”

The vast majority of shareholder resolutions will be voted upon this spring during 2007 stockholder meetings.

© 2007 American Federation of State, County and Municipal Employees, AFL–CIO

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