U.S. investors demand executive pension changes
Proposals by U.S. investor activists to rein in executive pensions will be put to a key test this week when the initiatives go to votes at companies including AT&T Inc. and Johnson & Johnson .
Shareholders who want a greater say in setting CEO pay complain that senior executives have accumulated unreasonably large amounts of money in company-funded pension plans.
They want to limit what can be considered a senior executive’s income when tallying how much the company should contribute to the pension, leaving out items like bonuses and incentives.
The result would be less money deposited in these retirement accounts, which for some CEOs can total in the tens of millions of dollars.
“From our perspective they are overly generous,” said Ed Durkin, corporate affairs director at the United Brotherhood of Carpenters, whose pension fund has submitted the shareholder initiatives at more than a dozen companies this year.
Other union groups have also introduced proposals on executive pension plans.
Of the companies in the Fortune 500, 328 have some sort of supplemental executive retirement plan, also known as a SERP, for top executives, said Heidi Toppel, a senior consultant at financial management adviser Watson Wyatt Worldwide Inc. , citing an analysis of proxy data.
When companies come up with a formula to calculate retirement benefits and throw annual bonuses into the mix, “you see how dramatically, dramatically they inflate the pension plan benefit,” said Durkin, whose union has proposed limiting the type of compensation that can be considered in determining retirement benefits to the executive’s base salary only.
$84.7 MILLION
The union put forth its proposal at companies including AT&T, where Chairman and CEO Edward Whitacre had a total of $84.7 million in total accumulated pension benefits in company plans as of year-end 2006, according to the company’s annual proxy filing.
J&J Chairman and CEO William Weldon had $23.5 million accumulated in his company retirement plans, according to the drug maker’s proxy, while Wells Fargo & Co.’s Chairman and CEO Richard Kovacevich had $25.9 million worth of accumulated benefits.
AT&T shareholders will vote on the shareholder proposal on Friday, while J&J investors will vote on Thursday. Wells Fargo shareholders consider it later on Tuesday.
Representatives for all three companies pointed to proxy statements by their boards outlining the companies’ objections to the proposals.
AT&T, in the proxy, said limits on supplemental retirement benefits “would substantially hamper and undermine its ability to attract and retain desirable candidates” for top jobs.
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