Targets Executive Pay
activist investor group proposes to adopt a requirement of
U.K. public companies, where all executive-pay packages are
subject to an advisory shareholder vote.
Stephen Taub, CFO.com
Wednesday, December 7, 2005
The pension plan for the American Federation of State,
County and Municipal Employees, one of the most activist
investor groups, has put what it deems to be excessive
executive pay atop its list of shareholder concerns for the
2006 proxy season.
The AFSCME plan has suggested that companies adopt a
requirement of U.K. public companies, where all
executive-pay packages are subject to an advisory
shareholder vote. "For too long shareholders have paid the
price for overcompensated executives who don't deliver for
the company," said Gerald W. McEntee, the pension plan's
chairman, in a statement. "The bad apples that mismanage
their companies — and even sometimes break the law — must be
AFSCME has submitted such a proposal to US Bancorp, Merrill
Lynch, Bank of America, Home Depot, and Countrywide
Other proposals submitted by the AFSCME pension plan
• Maintaining a percentage of after-tax shares provided to
executives under the company's equity compensation plan, so
an executive who exercises stock options also increases his
or her overall share ownership; submitted to FMC
Technologies and Amgen.
• Adding performance-based vesting measures to restricted
stock; submitted to Bristol-Myers Squibb, JP Morgan Chase,
and Time Warner.
• Limiting the compensation of senior executives in the
event of change in control or involuntary termination;
submitted to Emerson Electric and Raytheon.
• Seating directors only if they receive the support of a
majority of the shareholders; submitted as a binding
proposal to United Technologies, Honeywell, Wells Fargo, and
Qwest and as a non-binding proposal to Morgan Stanley.
• Allowing a shareholder who nominates a short slate of
candidates (fewer than half the seats on the board) to
recoup solicitation costs if their candidate(s) receives a
certain threshold percentage of the vote; submitted to Bank
of New York, Citigroup, and American Express.
• Declassifying the board; submitted to SunTrust Banks,
Wachovia, Mellon Financial, Washington Mutual, and 3M.