Employees, Too, Want a Say on the Boss’s Pay

[ProSense]

Employees, Too, Want a Say on the Boss’s Pay

By GRETCHEN MORGENSON

FINALLY, the shareholders are stirring.

Here and there this proxy season, executive pay is coming under attack from the people who actually own public companies, which is to say, stockholders. At Citigroup last week, a $15 million paycheck for Vikram S. Pandit, the chief executive, got a big thumbs down. Some 55 percent of votes cast went against the package.

One potentially powerful class of shareholders — employees — seems to be rousing, too. And, to the degree that employee-shareholders band together to have their say on the boss’s pay, they can be a formidable force.

Mr. Pandit seems to understand this. On April 13, he sent a memo to Citigroup’s employees, urging them to vote their shares. No surprise, he also recommended that they vote “yes” on the financial giant’s executive pay plans. It is unclear whether Citigroup’s employee-shareholders played a significant role in last week’s vote, which, though not binding, nonetheless was a sharp rebuke for Mr. Pandit and his board.

Traditionally, employee-shareholders have rarely exercised their voting power. But, as the vote at Citigroup suggests, stockholders of all stripes may be starting to assert themselves more.

- more -

http://www.nytimes.com/2012/04/22/business/employees-too-want-a-say-on-the-bosss-pay.html

Robert Reich: The Significance of Citigroup’s Shareholder Revolt
http://www.democraticunderground.com/1002579118

[abelenkpe]

1. K & R

Executive pay needs to be drastically reduced in this country.

[FBaggins]

2. Unlikely to play much of a role

Three reasons come to mind.

Employee-owned shares are disproportionally owned by senior employees (either through their own purchases or through the shares being a key part of their compensation package.

Those shares which are owned by low/mid-level employees are also more likely to exist within the company 401(k) (and are thus either not voted or are voted by management).

Those employee-owned shares that remain? How many will be scared off by the fear that the vote could impact their future employment?

[ProSense]

3. Regardless,

"Unlikely to play much of a role."

...you're making a point about the limited role this group would play, but the proxy votes are not separated by whether the shares are owned by employees or non-employees. The fact is that empowered employees will add to the significance of the vote.

Wal-Mart is urging its shareholders to reject the employee proposal. It says its board already analyzes incentive pay for executives, so the additional work being suggested would be duplicative.

Besides, shareholders can vote up or down on pay at Wal-Mart, the company said, making the shareholder’s request unnecessary. Its annual meeting will be June 1.

<...>

VERIZON is another company whose workers — in this case, retirees — are active in proxy matters. The Association of BellTel Retirees has rattled the company’s cage over pay and other governance practices for the last 16 years.

[corpgov.net]

4. employee owners

Yes, there are certainly difficulties in having employee voices heard. Management holds disproportionate shares, ESOPs and other vehicles are often structured so that management votes the shares. Reforms are sorely needed. However, employees, certainly if they organize, can make a real difference through their proposals and their votes. I don't understand here why Morgenson seems to say one employee group was recently the first to put up a proposal but later talks of more historical proposals from labor groups.

As I recall, the first proposal ever to get a majority vote was from the gadfly Gilbert brothers at Chock Full of Nuts. However, the second proposal, and I think it was the very next year long ago was from employees at either the Sante Fe railroad or Southern Pacific railroad. In older companies with multigenerational family employment, grandparent, parent, and grand children the block of stock owned by the employees and their families can be one of the largest blocks.

Mobilizing these folks through organizations like the United States Proxy Exchange (USPX or proxyexchange.org) and working closely with SRI, pension and other sympathetic funds can make a real difference. USPX has posted guidelines on how to vote say-on-pay proxy measures (takes about 60 seconds to figure out how to vote at any specific company). They also have developed model proxy proposals on proxy access (allowing shareowners to place their nominees on the proxy). It would be good to develop a model proxy access proposal that also does a better job of factoring in the voice of employees.