(The Associated Press circulated the following article by Mark Thiessen on May 5.)
SALT LAKE CITY, Utah — Despite a record $12 billion in revenue last year, Union Pacific Corp. executives weren’t paid any bonuses.
High fuel prices coupled with a surge in business that forced the company to hire nearly 5,000 new conductors and add almost 400 locomotives made it a challenging year for the nation’s largest railroad. Executives weren’t compensated because the company didn’t realize a 10 percent return on equity.
That incentive plan was scrapped Thursday by shareholders, which approved a new scheme that would be tied to internal measures and operating income growth, which would be set annually by a committee.
However, few specifics of the plan were provided in the proxy statement, and that didn’t go without notice before the shareholders voted.
”The problem is, there are no performance standards at all, nothing, zero,” said Greg Kinczewski, vice president of the Chicago-based Marco Consulting Group.
The Utah corporation’s annual meeting is held in Salt Lake City, even though the company headquarters are in Omaha, Neb.
The only caveats spelled out in the proposal, approved by a nearly 79 percent vote Thursday, were that the chief executive officer’s bonus cannot exceed 0.25 percent of operating income, which was $1.2 billion last year, and the limit for other executives was set at 0.15 percent.
Kinczewski said that left it up to the company’s compensation committee to ”pick out of thin air” anything they want to use as criteria for executive bonuses.
Even though no bonuses or raises were given to Union Pacific executives last year, they are far from needing public assistance.
On top of Chairman Dick Davidson’s $1.3 million salary, he received almost another $4 million in annual and long-term compensation. The other top four officers last year all had six-figure salaries and more than $900,000 in other compensations last year – with three of the four getting $1.2 million or more.
Davidson noted the railroad’s challenges when recapping the last year, including the Western storm in January that cost the company about $115 million in both lost revenue and infrastructure repairs. The high price of fuel, which rose 44 cents between the first and fourth quarters, cost the company $200 million more in 2004 than the year before.
But Davidson said the railroad should still experience high demand this year, and is now drawing contracts that will account for fluctuations in fuel prices.