SBC Links Executive Comp to Financial Performance

March 1, 2004 ( - SBC Communications is implementing a new executive compensation system that would more closely link executive pay to the company's financial performance.

To executive compensation watchers the story may seem familiar.    At the end of last April, SBC’s shareholders, by a 65% to 35% margin, voted down a measure proposed by TIAA-CREF, that would have linked stock-based compensation to the financial performance of the company (See  SBC Shareholders Turn Down Executive Comp Proposal ), according to an Associated Press report.

TIAA-CREF said by exposing executive compensation to downside financial risk, it would have better aligned shareholder with management risk.  In filing its proposal, TIAA-CREF noted that in 2001 SBC Chairman and CEO Edward Whiteacre, Jr was granted stock options with an estimated present value of $43.6 million.

It was the dissatisfaction in the shareholders that ultimately spurred the move by   independent board director James Henderson , the new head of the board’s executive compensation committee, to propose the new system.   No details about how the new system would link pay to performance were provided.

With the move, SBC joins a growing list of companies that are mixing up their executive compensation programs to link pay more closely with financial performance.    Last week, IBM released details of a deal aimed at making the company’s executives more accountable to investors by adding a clause to its executive stock option plan that does not permit the exercise of shares unless the stock has gained more than 10% (See  IBM Reboots Executive Option Program ). Previously other executive compensation shakeups were announced atGeneral Electric (See  GE Brings Executive Comp Changes To Life ) and Verizon (See Verizon Hears Shareholders Now ).