Human Capital & Careers

Mutual Fund Trying to Cap Gap Pay

An institutional investor attempts to put limits on executive pay at the clothing chain.
Stephen TaubApril 1, 2004

An institutional investor is hoping to cap the salary of Gap Inc. CEO Paul Pressler at $1 million. Last year, Pressler received a salary of $1.5 million and a bonus of $3.1 million.

The institutional shareholder, a mutual fund dubbed United Association S&P 500 Index Fund (UAIF), has sponsored a non-binding proposal that will be presented at apparel chain’s upcoming annual meeting. The proposal aims to tie Pressler’s salary to the mean of salaries paid to CEOs at peer-group companies, as well as limit his compensation. Further, the proposal seeks to cap bonuses at a percentage (below 100 percent) of the executive’s salary and limit severance so that the payout would not exceed one year’s salary and bonus.

The UAIF is a mutual fund sponsored by the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada. The fund owns 56,693 shares.

Gap officials say they oppose the proposal and are urging shareholders to vote against it.

Last year, CFO Byron Pollitt earned more than $1.7 million, including a bonus worth more than $1 million. Company executives said this includes an initial bonus of $350,000 paid to Pollitt in connection with an employment contract.

The shareholder proposal urges that senior executives receive long-term equity compensation in the form of restricted shares rather than stock options.

Also, executives would be required to retain all shares awarded under the program for the duration of their employment, and the value of a restricted share grant would not exceed $1 million on the date of grant.