As CEO Pay Rockets, Shareholders Urge Companies to Share Rewards

Press Release
For Immediate Release - April 5, 2000
Contacts: Stacie Garnett (617) 423-2148 x19 | Betsy Leondar-Wright (617) 423-2148 x13
bleondar-wrightfaireconomy.org"> bleondar-wrightfaireconomy.org

As CEO Pay Rockets Higher, Shareholders Urge
Companies to Share the Rewards More Widely

Responsible Wealth members have filed 14 shareholder resolutions to encourage companies to share profits more widely with employees. The varied resolutions call on companies to link CEO compensation to worker compensation and freeze CEO pay after layoffs; others address corporate lobbying, campaign contributions, corporate governance and corporate welfare. Resolutions will be voted on this spring at General Electric, Honeywell, American International Group, AT&T, Raytheon and Huffy.

New reports by Bloomberg, Forbes, USA Today and the New York Times all point to another record-breaking year for CEO compensation at a time of only tiny advances by average workers after years of falling real wages. The Wall Street Journal and Business Week release their CEO pay reports this week. According to the New York Times, average CEO compensation jumped 23 percent, to $11.9 million, in 1999. "Thanks to stock and options from previous years," the Times reports, "the average corporate leader has squirreled away holdings worth an additional $75 million." Average full-time worker pay, meanwhile, rose a mere 3 percent in 1999 to about $33,000.

"Companies that make CEOs megamillionaires and billionaires while shortchanging most employees are building on quicksand," says Scott Klinger, Co-director of Responsible Wealth.

Among the Responsible Wealth shareholder resolutions, four --General Electric, Citigroup, Honeywell and American International Group -- are directed at companies whose CEOs were among the top 20 in 1999 salary and bonus, excluding stock options, according to the Bloomberg report by Graef Crystal. Honeywell CEO Michael

Bonsignore made almost $54 million in 1999 while 11,600 workers are being laid off worldwide due to the merger with AlliedSignal. A shareholder resolution asks Honeywell to establish a maximum ratio between the pay of the CEO and the lowest paid worker.

General Electric CEO Jack Welch made over $93 million in 1999 -- an amount equivalent to 14 percent of the profit from the sale of GE appliances. GE is also one of the nation’s biggest campaign contributors and beneficiaries of corporate welfare. According to Time, "There is no starker example of the phenomenon of corporate welfare and vanishing jobs than General Electric." A resolution asks the company to report to shareholders on its lobbying practices, campaign contributions and use of shareholder funds for political purposes. Another resolution calling for a report on corporate welfare was excluded by an SEC decision.

AT&T, another big beneficiary of corporate welfare, is the subject of a resolution asking it to report on the financial benefit received by the company from government subsidies, including direct subsidies, tax abatements and government-backed below-market financing. Another resolution asks AT&T to freeze executive compensation during periods of downsizing. "Corporate executives should not have all the gain while regular employees have all the pain," said Judith Barnet, an AT&T shareholder who filed the resolution.
Similar resolutions were filed at Huffy and Raytheon. After announcing it would lay off more than 15,000 workers in 1998, Raytheon increased the salary and bonuses of its top four officers by more than 30 percent. Studies by the American Management Association and Wharton Business School show that downsizing often has negative impacts on company success.

Responsible Wealth is also addressing the self-serving nature of corporate boards stacked with corporate officers by challenging companies to make their governance more democratic. A shareholder resolution filed at American International Group calls on the company to nominate 50 percent more director candidates than the number of seats available on the board. Currently, the AIG board has a majority of insider directors.

Shareholder resolutions filed with Citigroup and Walt Disney called upon each company to create a universal employee stock ownership plan and fund it with an annual stock contribution at least equal to the value of stock options and awards given to corporate officers. As the Disney resolution notes, if only half the over $1 billion CEO Michael Eisner has reaped from exercising stock options since 1992 had been divided among Disney’s 117,000 worldwide employees, they would have received, on average, over $4,200 each, leaving Eisner with the still massive sum of $500 million.

Both companies convinced the Securities and Exchange Commission to exclude the resolutions because they deal with employee benefits, a part of "ordinary business" that shareholders may not vote on. The SEC also excluded resolutions at American Home Products and MBNA that called for reports on employee stock ownership.
Responsible Wealth member Michele McGeoy, CEO of the California-based technology firm RH Solutions, spoke in favor of the excluded Disney resolution at the February shareholder meeting. "It’s time that Disney think of its employees as assets, not just Mickey Mouse," McGeoy said to loud applause.

Objecting to the SEC decisions, Scott Klinger said, "The SEC should be part of the solution to harmful compensation practices, not part of the problem. There is clear and consistent evidence that broad-based employee ownership improves corporate performance and enhances shareholder value."

Responsible Wealth is a growing network of over 450 businesspeople, investors and affluent Americans in the top 5% of income and wealth who are concerned about growing economic inequality and working to promote widely shared prosperity. It is affiliated with the national nonprofit organization, United for a Fair Economy.

Responsible Wealth recently released a groundbreaking report, "Choosing the High Road: Businesses That Pay a Living Wage and Prosper." The report and the shareholder resolutions are available online at www.responsiblewealth.org and upon request.