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For more details about the campaign reported below by a group of activist institutional investors, including comments from some of the group's leaders, see the following:

Copies of the actual corporate response letters are also available on the Connecticut State Treasurer's web site, from links at the following address:



Dow Jones Newswires, January 2, 2007 article


The Wall Street Journal  

January 2, 2007 4:20 p.m. EST


More Cos Agree To Disclose Compensation Consultant Ties

January 2, 2007 4:20 p.m.

   By Kaja Whitehouse 

NEW YORK (Dow Jones)--Eighteen of 25 companies have responded to a request from a group of shareholders for information about ties they may have with the consultants that advise their boards on how to pay top officers.

The responses varied but most companies complied with at least part of the shareholders' request, which asked for more disclosure and for companies to adopt policies to squash any potential conflicts of interest.

In addition to helping the board hammer out pay for top executives, consulting firms can also be hired by management for other work, such as crafting the benefits plan for rank-and-file workers. The shareholders pushing this effort worry consultants may be reluctant to provide objective advice on executive pay if they rely on management's approval to win other business at a company.

"We are convinced it is in the best interest of shareholders and corporations for compensation consultants to provide independent, unbiased advice regarding executive compensation," said Connecticut state treasurer Denise L. Nappier, who heads the state's $23 billion retirement fund. "The responses confirm that a solid number of leading companies agree," she said in a press release issued Tuesday.

Most respondents, including ConocoPhillips (COP) and Microsoft Corp. (MSFT), revealed the name of their compensation consultants and disclosed any outside business relationships they may have with them. For example, ConocoPhillips said its board uses Towers Perrin, and that the board's compensation committee has twice approved, since September 2005, Towers Perrin performing other work for the company.

Exxon Mobil Corp. (XOM) and General Electric Co. (GE) made public the contents of their letters late last week, and said they will disclose this information to investors in their proxy statements this year.

Cisco Systems Inc. (CSCO), Home Depot Inc. (HD) and Procter & Gamble Co. (GE) said they generally prohibit their executives from hiring the same consultants that advise their boards on how to pay top officers. The state of Connecticut called these and seven other policies "best practices."

A Dec. 1 letter from Proctor & Gamble, for example, says its compensation consultant "will do no work for management and will have no other connection to the company."

Occidental Petroleum Corp. (OXY) said it "does not believe such a policy would necessarily serve the best interests" of the compensation committee, which evaluates such concerns on a "case by case basis."

Dow Chemical Co. (DOW) said it tries to keep ties to a minimum, but "given the size, complexity and global scope" of the company, it cannot guarantee "absolutely no unrelated work for Dow someplace in the world."

A few respondents, including Bank of America Corp. (BAC) and Morgan Stanley (MS), said they are considering the request.

Morgan Stanley's compensation committee "plans to discuss the questions raised" by the letter at its next scheduled meeting, said a Nov. 16 letter by the money manager.

Companies that have yet to respond to the letter are Hewlett-Packard Co. (HPQ), Merck & Co. Inc. (MRK), Citigroup Inc. (C), J.P.Morgan Chase & Co. (JPM), Texas Instruments Inc. (TXN) and Verizon Communications (VZ).

Companies with policies that fall short of shareholders' expectations could be targeted with proposals asking that investors be given the chance to vote on the matter, Connecticut state's press release said.

Nappier's office has been leading the effort, which started with a letter to the 25 largest Standard & Poor's 500 companies in October, asking them to come clean about any relationships they may have with their compensation consultants and urging them to adopt policies that would eliminate any ties. The letter was signed by 13 institutional investors representing $850 billion in assets, including London money manager F&C Asset Management (FCAM.LN) and the AFL-CIO union.

By Kaja Whitehouse, Dow Jones Newswire; 201-938-2243;

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