Human Capital & Careers

AFSCME Targets Executive Pay

The activist investor group proposes to adopt a requirement of U.K. public companies, where all executive-pay packages are subject to an advisory s...
Stephen TaubDecember 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 stopped.”

AFSCME has submitted such a proposal to US Bancorp, Merrill Lynch, Bank of America, Home Depot, and Countrywide Financial.

Other proposals submitted by the AFSCME pension plan include:

• 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.

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