Shareholders Press Huffy on Wage Gap After Plant Closing, Layoffs

Press Release
For Immediate Release - April 20, 1999
Contact:Betsy Leondar-Wright
(617)423-2148 x13

Shareholders Press Huffy on Wage Gap, CEO Raise After Plant Closing and 1,000 Layoffs

"While Huffy's leaders have been focusing on cutting costs on the factory floor, they have not focused similar attention on containing costs in the executive suite or in the Boardroom."

- Shareholder Resolution

A Huffy shareholder resolution is challenging the company's Board of Directors to publish the ratio between the pay of the CEO and that of the lowest-paid worker in the company. Resolution filers point to CEO and Board raises in 1998 despite poor stock performance and the closing of the Celina plant, which eliminated over 1,000 jobs.

Huffy shareholders will vote Thursday April 22 in Dayton, Ohio, on the 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 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.

Scott Klinger, Project Director of Responsible Wealth, will present the resolution on behalf of Trillium Asset Management (formerly Franklin Research and Development), which filed the resolution. (See attached statement and resolution.)

Only two months before the Celina plant closing in June 1998, Huffy's Board voted itself an 18.4% increase in their annual retainer fee. After the plant closing, CEO Don Graber also saw his compensation rise 9% in 1998, to $1.1 million, not including stock options worth $1.7 million.

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 in 1980.

In addition to Huffy, the Responsible Wealth resolutions have been introduced at AlliedSignal, AT&T, BankAmerica, BankBoston, Citigroup, Computer Associates, General Electric, and R.R. Donnelley. Most of the resolutions ask the company to set a reasonable ratio between CEO pay and the lowest-paid full-time employee in the company. The Huffy resolution asks the company to report on this ratio by September 30, 1998. 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 the April 20 shareholder meeting, but the company has not yet released the results of the vote.

"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 Scott Klinger at Huffy Annual Meeting -- April 22, 1999

Good morning, my name is Scott Klinger. I am the Project Director of Responsible Wealth, a nationwide network of business leaders and investors who have joined together to address the growing economic divide in America. I am here this morning representing Trillium Asset Management, filer of this resolution which calls upon Huffy to prepare a report presenting the ratio between the company's highest paid and lowest paid worker over each of the last ten years.

Last spring, Huffy announced the closing of its Celina, Ohio facility, a plant that was the envy of the bicycle manufacturing world. The closing of this plant meant that 1,000 long-term employees lost their jobs. These were workers known for their productivity. They were also known for their willingness to do their part to lower production costs. In 1995, the Celina plant workers accepted a 20% cut in their pay, bringing their average salary down to $10.80 an hour. This was not enough, however, to preserve their jobs or their community.

There can be no dispute that the intense international competition in bicycle manufacturing has created significant challenges for Huffy. What is open to question is how a company responds to such challenges. In the weeks preceding the decision to close the Celina plant, Huffy's Board and management were granted double digit pay increases. How are workers throughout the Huffy organization to understand why they must sacrifice, even to the point of losing their livelihood, while their already well-paid leaders reap increased rewards?

Who among us would find it socially acceptable for parents to turn their children away from the dinner table for want of food, only to serve themselves an extra helping of meat and another scoop of potatoes once the hungry children have departed? It is not my intention to equate workers with children. It is however my intention to suggest that shared enterprise, whether it is a family or a corporation, is strengthened when the rewards and sacrifices are shared equitably among all members.

There was a time in America's past when the fortunes of business owners and leaders were linked to the success of the average worker, perhaps not through formal policy, but certainly through standards of socially acceptable behavior. During difficult periods, compassionate bosses reduced their pay in order to preserve as many jobs as possible. Sadly, this ethic has been lost in modern American business.

In its place is the "great person theory of shareholder value" that suggests a small handful of leaders is responsible for the creation of wealth. It is this theory that undergirds pay practices that reward executives while employees are being asked to sacrifice. This philosophy tears at the social fabric of both the corporation and of the broader community. It threatens the long-term viability of the corporations and the democracy upon which our economy rests.

Unlike the eight other resolutions on executive pay introduced by Responsible Wealth members at shareholder meetings this spring, this resolution does not ask the company to cap CEO pay in any fashion. This resolution makes only a simple request: that the company furnish shareholders with information -- information comparing the financial rewards received by executives to those received by average employees. It is not a difficult request to fulfill. I doubt that it would take one employee even an afternoon to complete the job. And yet Huffy's Board has asked you to oppose this resolution. Why? I believe it is because the information when looked at will make most of us uncomfortable. It will force us to confront our personal values and the values for which The Huffy Corporation is known.

America 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" resolution number 3. Thank you.