(The following story by Stacie Hamel appeared on the Omaha World-Herald website on April 17.)
SALT LAKE CITY, Utah — Union Pacific Corp. shareholders rejected proposals Friday aimed at executive compensation and disclosure of political contributions but handed the company approval of a new stock-incentive plan.
“The shareholders spoke with their votes,” said Jim Young, president of Union Pacific Railroad. “We’re pleased.”
At the annual shareholders meeting here of the Omaha-based company, the owners of 67 percent of the shares voted to approve a company-proposed stock-incentive plan to allow up to 21 million shares of stock to be granted as options, appreciation rights, retention shares or other incentive forms.
“It’s consistent with other companies today,” Young said of the incentive plan. “You want management to think and act as a shareholder.”
The owners of more than 139.7 million shares voted for the plan. Just fewer than 67.2 million shares were cast against, and the owners of 19.5 million shares abstained.
About 50 people attended the meeting at the Little America Hotel here.
Union Pacific officers faced questions from shareholders on topics ranging from executive pay increases and trains stopped on tracks because of crew shortages to its brand licensing program for model railroad companies and the absence of the company’s board members at the annual meeting.
“I wanted to see Henry Kissinger when he was on your board,” one shareholder said. “I came down here and no Kissinger. Do bring your directors. We certainly have the right to see them.”
Chairman and Chief Executive Dick Davidson said he hadn’t made a point of asking directors to come but would address the issue at the next governance committee meeting.
Six Union Pacific employees, including Leonard Buhrman of North Platte, Neb., were honored for 50 years or more of service with the company. The conductor brought along two sons, Richard and Bill, who each has worked more than 25 years for U.P.
Vice Chairman Ike Evans said Bill Buhrman recalls asking his father if he had to go to work, and Leonard Buhrman replied, “I don’t got to go to work. I get to go to work.”
The company had recommended voting against a shareholder proposal to no longer allow stock options to be used in executive incentive plans. The proposal was offered by the Brotherhood of Locomotive Engineers.
The owners of more than 185.4 million shares voted against the proposal. Just fewer than 19.5 million shares were cast for the proposal, and the owners of about 4 million shares abstained.
The measure would have replaced stock options with restricted shares that vest over at least three years, are awarded based on operational performance measures disclosed to shareholders, yield no dividends or proxy voting rights before vesting, and must be retained for the executive’s tenure with the company.
It was the second year in a row that shareholders have offered proposals targeting executive compensation.
A year ago, shareholders approved a plan targeting so-called “golden-parachute” contracts. The U.P. board later enacted the measure, which requires that it seek shareholder approval for executive severance packages more than three times annual salary and bonus.
The company also recommended voting against this year’s proposal backed by a corporate governance watchdog group to require U.P. to issue twice-a-year reports on its political contributions.
The owners of more than 164 million shares voted against. Just over 16.2 million shares were cast for the proposal, and the owners of 24.5 million shares abstained.
The Central Laborers Pension, Welfare & Annuity Funds, which owns 1,600 U.P. shares and has been active in corporate governance issues since 1998, submitted the proposal with assistance from the Center for Political Accountability.
The center has helped with the same shareholder proposal this year for about 30 large corporations. Friday’s was the first vote.
The center’s John Richardson said he was pleased with the number of votes the proposal garnered the first time it was offered. The proposal will be offered again next year, he said.
“Most brand-new resolutions like this that have not faced shareholder consideration get a small percentage of votes,” he said. “The good news is that a number of big, public-employee pension funds have taken a position in support of this.”
In regard to both shareholder proposals, Davidson said in an interview before the vote, “They make no sense whatsoever. The stock-option proposal would make us different than every company in America and would disadvantage us in recruiting.”
The political disclosure proposal was redundant, he said.
Most of the money donated through Union Pacific is employee contributions, not corporate money, and is subject to disclosure requirements, Davidson said. Recent changes in laws governing corporate donations don’t allow soft-money contributions.
Richardson, however, said the laws still have holes that allow corporate donations, creating a need for resolutions requiring disclosure.
Union Pacific traditionally holds its shareholder meeting in Salt Lake City, although its headquarters is in Omaha, because the company was incorporated in Utah, Davidson said.
“It’s our home,” he said.