(Reuters circulated the following article by Emily Chasan on April 11.)
NEW YORK — The AFL-CIO, a federation of U.S. labor unions, on Monday called on the shareholders of several U.S. corporations to reform chief executive pay packages so executives focus more on increasing long-term shareholder value instead of cashing in stock options.
“Union sponsored pension funds hold $400 billion in total assets and not only are they institutional investors, but they are also major advocates of shareholder resolutions to reform CEO pay,” said Brandon Rees, a research analyst at the AFL-CIO office of investment.
Specifically, the union federation which represents about 13 million U.S. workers, launched case studies of union pension fund shareholder proposals to reform executive pay at Amgen Inc. (AMGN.O: Quote, Profile, Research) , Sprint Corp. (FON.N: Quote, Profile, Research) , Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) , Sempra Energy (SRE.N: Quote, Profile, Research) , Dynegy Inc. (DYN.N: Quote, Profile, Research) and Coca-Cola Co. (KO.N: Quote, Profile, Research) .
The proposals ranged from one at biotech company Amgehat that would require executives to own a “significant percentage” of common shares, to one that critiques a $119 million severance package to former Coca Cola chairman and chief executive Douglas Ivester, despite sagging profits and a federal investigation into the company’s accounting.
Some of the proposals were from the AFL-CIO itself and others were sponsored by its members.
The AFL-CIO said proposals such as these would better link pay-to-performance at U.S. corporations. The union federation has also launched a new Paywatch Web site, which it hopes will increase individual stockholder attention to executive pay.
“CEO pay packages tend to reward short-term decisions, as opposed to those that support long-term shareholder value,” Rees said.
Rees expects the proposals to draw high, if not majority, votes at many of these company’s shareholder meetings. In fact, the proposal at gas pipeline company Sempra Energy, which asked the Board to establish a policy of expensing stock options was approved in April.
The debate over executive pay has attracted increasing scrutiny since the collapse of companies such as Enron and Worldcom, which left shareholders with huge losses while executives cashed in on billions in stock options. But critics have said shareholder proposals like this are likely to only have a modest impact as they could spur executives to quit early to cash in on stock, or limit executives’ ability to diversify their investments.