Limiting Executive Pay by Proxy
Almost everybody disapproves of the outlandish pay packages that corporations give their chief executive officers (CEOs)--except, perhaps, the CEO's with the supersized pay checks. In 2007, the income of CEOs working for corporations in the S&P 500 averaged $10.5 million annually. That's 344 times the pay of typical American workers. Excessive executive pay practices distort stock prices, destabilize the economy, and deter responsible growth. The Obama Administration took the issue head-on when it created the office of the 'pay czar' to set executive compensation for companies that received bail-out money. But for most companies, it's the board of directors who set up and vote on compensation for top management. And, ultimately, boards of directors are accountable to their corporations' shareholders.
After three years of shareholder pressure, more than 50 companies have now voluntarily adopted giving their shareholders an annual advisory vote on executive compensation, colloquially known as "Say on Pay."
North Star Fund has participated in this landmark victory by voting our proxies every year since 2007. We have consistently supported the right of investors to weigh in on executive compensation, voting for shareholder resolutions 26 times in the past three years, because we believe the wide chasm between the highest and lowest paid at America's corporations is bad for workers, bad for democracy and ultimately, bad for shareholder returns.
According to a press release from AFSCME and Walden Asset Management:
This milestone comes in the midst of the continued public debate focusing on executive compensation and Wall Street's $20 billion bonus payouts. Legislative efforts to initiate this reform passed the House of Representatives and are currently before a Senate Committee.
"Say on Pay holds corporate leaders accountable for unjustifiable CEO pay," said AFSCME President Gerald W. McEntee, whose 1.6 million members participate in public pension funds with combined assets worth more than $1 trillion.
A unique network of investors - comprised of public pension funds, labor funds, asset managers, individual investors, foundations and religious investors, who are members of the Interfaith Center on Corporate Responsibility (ICCR) and organized by the American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME) Employees Pension Plan and Walden Asset Management, a division of Boston Trust & Investment Management Company - have been pushing for annual advisory shareholder votes on executive compensation since 2007. The campaign at the corporate level and at the SEC has been so effective that President Obama has required any company receiving TARP (bail-out) money to include this resolution.
You can be part of this dynamic form of activism. If you are an investor and would like to learn more about how to vote your proxies and participate in shareholder activism, please consider attending our workshop entitled Proxy Time on Wednesday, April 21.
