Shareholders Press BankBoston on CEO Pay after Fleet Merger

Press Release
For Immediate Release - April 20, 1999
Contact: Betsy Leondar-Wright
(617) 423-2148 x113

Shareholders Press BankBoston on CEO pay, Golden Parachutes, Layoffs after Fleet Merger

A group of BankBoston shareholders are challenging the company's Board of Directors to set a maximum ratio between the pay of the CEO and that of the lowest-paid worker in the company. They contrast the"golden parachutes" provided to top executives in the forthcoming merger with Fleet Bank with the 5,000 layoffs expected to result from the merger.

BankBoston shareholders will vote Thursday April 22 in Boston on a shareholder resolution, which is part of a national campaign addressing the wage gap that was profiled in the April 8 Wall Street Journal. Members and supporters of Responsible Wealth, a project of the Boston-based national nonprofit United for a Fair Economy, have introduced shareholder resolutions about wage inequities between CEOs and average workers at nine U.S. corporations so far this year.

The BankBoston resolution points to CEO Chad Gifford's 1998 compensation of $2.77 million in salary and bonus, which is almost 50% higher than the average banking CEO during a year when shareholder returns fell 14.9%. Mr. Gifford also received stock options with a present value of $23.4 million.

When BankBoston shareholder and member of Responsible Wealth Jennifer Ladd presents the resolution, she will point to BankBoston's impressive record on community investing and charitable donations and challenge the company to continue that legacy of social responsibility in addressing the company's wage gap after the Fleet merger. (See attached statement and resolution.) In a striking departure from the typical CEO greed, Chad Gifford has pledged to donate his"golden parachute" to his personal foundation if he loses his job after the merger with Fleet."By limiting the ratio between the biggest and smallest paychecks, the company could extend this ethic of shared prosperity to its employees as well as the community," according to Responsible Wealth spokesperson Scott Klinger.

Resolution proponents were prompted to act by the threat that the growing wage gap poses to working Americans and to the nation's economic well-being. According to Business Week, CEOs now earn an astounding 419 times the pay of average blue-collar workers, up from 42 times as recently as 1980.

In addition to BankBoston, the Responsible Wealth resolutions have been introduced at AlliedSignal, AT&T, BankAmerica, Citigroup, Computer Associates, General Electric, Huffy, and R.R. Donnelley. Some of the resolutions ask the company to set a reasonable ratio between CEO pay and the lowest-paid full-time employee in the company. Others ask the company to report on this ratio. One resolution asked the company to conduct a pay equity study by race and gender.

The first of the resolutions, on gender and race pay equity, at the Chicago-based R.R. Donnelley & Sons on March 25, garnered a surprising 16.2% vote, or 13 million shares. This is a very strong showing given voting procedures that favor management positions on proxy resolutions. According to the Investor Responsibility Research Center, shareholder resolutions of this type averaged 9.2% of the vote in 1998. The second resolution, at Citigroup, came to a vote at today's shareholder meeting, but results will not be available for a couple days.

"Responsible Wealth is on our way to generating 100 million votes this year for greater shared prosperity," Klinger said."Many Americans now see CEO pay as out of control. Even Federal Reserve Chairman Alan Greenspan has publicly criticized such lavish compensation and severance packages."

United for a Fair Economy (UFE) is a national nonprofit organization that spotlights growing economic inequality and advocates shared prosperity. UFE recently published Shifting Fortunes: The Perils of the Growing American Wealth Gap.

Responsible Wealth, a project of UFE, is a growing network of over 400 business people, investors and affluent individuals in the top 5 percent of income and wealth working together to reverse the trend toward growing economic inequality.

Remarks of Jenny Ladd at BankBoston Annual Meeting -- April 22, 1999

Good morning, my name is Jennifer Ladd. In addition to being a shareholder of BankBoston I am also a member of Responsible Wealth, a nationwide network of business leaders and investors who have joined together to address the growing economic divide in United States. This year, Responsible Wealth members have introduced nine shareholder resolutions on economic inequality with U.S. corporations, including this resolution at BankBoston.

In 1998, according to Business Week, the average large company American CEO's compensation was 419 times that of the average manufacturing worker, up from 326 times last year and 42 times as recently as 1980. Such towering discrepancies between corporate leaders and those they seek to lead create obvious morale problems within the corporation.

As our company prepares to merge and thousands of our company's employees face the loss of their job, we need to revisit the short-term nature of present compensation policies that offer narrow and unacceptable incentives to a few leaders for laying off large numbers of workers while leaving the majority of workers more economically insecure, fearful that their jobs too will be downsized or restructured. Pay practices which encourage disloyalty to workers foster worker disloyalty in return.

Farther from home wide disparities in wealth also create social instability, which in turn harms the business climate. BankBoston shareholders know first hand the difficulties that can result when highly wealth-stratified nations like Brazil stumble. For a time, wealth concentrated in the hands of the few can paint a false picture of growing national prosperity. It is, however, a picture that is not sustainable.

There is growing belief in United States that executive compensation is out of control. Earlier this year, Federal Reserve Chairman Alan Greenspan testified before Congress that shareholders were wasting their money on lucrative CEO compensation and severance packages. Mr. Greenspan concluded, however, that there was little the government could do to address this concern. While the government's hands may be tied, our hands as shareholders are not.

It's time for a change! It is time to re-think the incentives we offer leaders of our corporation. It is time to look at the large option grants offered our leaders who already have options worth millions of dollars, and ask "how much incentive is enough?" It is time that we refute the "great person theory of shareholder value" that one person is responsible for the vast creation of wealth. It is time that we openly discuss the effects of concentrated wealth on our company, on the economy and on our democracy. Our proposal offers one simple solution to engage this discussion. We ask that BankBoston establish a ratio between highest and lowest paid workers. It asks that the success of our company's leaders be linked to the success and security of their colleagues, the co-creators of value for shareholders, customers and society.

I stand here as a BankBoston shareholder proud of our company's leadership in many areas of corporate responsibility, especially its pioneering efforts in developing inner city banking markets. Our company is now preparing to be merged into Fleet Bank. It would be a wonderful legacy to the long and proud tradition of BankBoston for our company to act with a similar pioneering spirit to proclaim the shared success and security of corporate leaders and employees as called for in this resolution.

The United States stands at an important crossroads. Will we head into the next century as a nation divided by two sets of economic values: one that operates on a "winner takes all" principle, the other founded on the deeply seated American dream that all people who work hard deserve economic security and the opportunity to improve their lot in life? The answer to this question is up to us -- as people-- as citizens -- and as shareholders.

Please vote "FOR" this resolution. Thank you.