According to a Nappier news release, the proposals focus on six areas of executive pay:
- Say on Pay. In recent years, shareholders have sought the right to cast an advisory vote on the executive pay package known as “Say on Pay”. The vote serves as feedback to the board about the investors’ views on executive compensation and can lead to a broader dialogue on pay. The CRPTF filed resolutions asking for Say on Pay at CVS/Caremark, WellPoint, Goldman Sachs and ConocoPhillips. Proposals filed at Goldman Sachs and ConocoPhillips were withdrawn after both companies agreed to adopt Say on Pay policies.
- Responsible Use of Company Stock. The CRPTF filed two shareholders proposals advocating responsible use of stock through equity retention requirements and limits on derivative or speculative use of company stock by executives. One shareholder proposal, co-filed at The Dow Chemical Company with the AFSCME Employees Pension Plan, asks the board to adopt a policy that would require executives to hold a significant percentage of their equity in the company for two years following the termination of their employment. A second resolution, co-filed at Chesapeake Energy with Amalgamated Bank’s LongView LargeCap 500 Index Fund, asks the board to adopt a policy promoting the responsible use of company stock by executives and directors through limits on pledging and hedging transactions.
- Board Accountability for Pay Decisions. Shareholders seek to hold board members accountable for pay decisions on an annual instead of triennial basis. To encourage greater accountability for directors, including members of the board compensation committee, the CRPTF filed shareholder proposals at Abercrombie & Fitch and Nabors Industries asking them to allow for the annual election of candidates for board seats.
- Severance Arrangements. The CRPTF opposes large payouts to executives in a merger situation when there is no risk of job loss. The pension fund also opposes compensating executives to make up for federal taxes owed on severance awards. The CRPTF filed a shareholder proposal seeking the adoption of responsible severance principles at United Technologies Corporation. Following a productive dialogue with the company on new developments in its severance practices, the CRPTF withdrew the resolution.
- Compensation Consultant Disclosure. The CRPTF has advocated for disclosure of all fees paid to compensation consultants engaged by both the board compensation committee and company management so that shareholders can determine if such consultants are independent. The CRPTF withdrew a shareholder proposal filed at Citigroup asking for such disclosure after the company affirmed its board now uses an independent compensation consultant. A similar resolution co-filed with the AFL-CIO at Halliburton is expected to go to a vote at the company’s annual meeting.
- CEO Pay Tied to Succession Planning: One important element of CEO pay is the requirement that CEOs fully participate in the board succession planning process, limiting transition risks and other costs. To address these issues, the CRPTF filed a shareholder proposal at Bank of America asking the board compensation committee to adopt a policy linking CEO pay to successful succession planning.
The news release said that on February 2, 2010, the Office of the Connecticut State Treasurer, along with 30 institutional investors, released an open letter to 17 financial companies asking them to adopt Say on Pay. Nappier also has called on U.S. Congressional leaders to include a provision in any final regulator reform regulation to require Say on Pay for all companies.
The letter to the financial institutions can be viewed at http://www.state.ct.us/ott.
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