More Cos Agree To Disclose
Compensation Consultant Ties
DOW JONES NEWSWIRES
January 2, 2007 4:20 p.m.
By Kaja Whitehouse
Of DOW JONES NEWSWIRES
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;
kaja.whitehouse@dowjones.com
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