Investors demanding say in CEO pay
NEW YORK - Wall Street's high-rolling chief executive officers live a lifestyle that would make Hollywood movie stars jealous: penthouse apartments, private jets, and paychecks tipping $60 million a year.
NEW YORK - Wall Street's high-rolling chief executive officers live a lifestyle that would make Hollywood movie stars jealous: penthouse apartments, private jets, and paychecks tipping $60 million a year.
Corporate boards in recent years have rubber-stamped generous bonus packages for an elite set of executives, a reflection of a go-go stock market and soaring profits. Now, as the credit crisis roils Wall Street and devastates stock prices, shareholders are demanding a voice.
Fund managers and individual investors alike are campaigning for a "say on pay" rule, giving shareholders a vote on executive compensation at major corporations, especially America's biggest banks. This is the latest salvo in the battle against Wall Street's exorbitance, and this time it appears shareholders might stand a chance.
Timothy Smith, a senior vice president at Boston's Walden Asset Management, nearly pulled off a "say on pay" resolution at Goldman Sachs Group Inc.'s annual meeting Thursday. The proposal garnered 43 percent of the vote, despite strong recommendations for its rejection from chief executive Lloyd Blankfein and the investment bank's board.
"To us it appears that Wall Street has a severe rash, to which its boards, made up of corporate members, respond 'You scratch my back, and I will scratch yours,' " said Smith, whose firm owns 65,000 shares of Goldman Sachs.
Indeed, most boards these days are hand-picked by management and typically include executives from other companies. Goldman's board has former top executives from Sara Lee Corp., Medtronic Inc., Colgate-Palmolive Co., and Allstate Corp.
They might find the latest push on compensation difficult to ignore: Some comes from institutional investors.
Smith complimented Blankfein for navigating Goldman Sachs clear of the credit crisis, for the most part.
But Blankfein, who took home about $54 million in 2007, rejected the proposal, saying he didn't want anyone less sophisticated, with less understanding of the financial industry, making pay decisions.
He likely hasn't seen the last of Smith, and CEOs across every industry are facing similar challenges as companies hold their annual meetings throughout April and May.
About 100 companies - from General Electric Corp. to Wal-Mart Stores Inc. - will be voting on "say on pay" proposals, but the odds might not be in shareholders' favor. The average level of support for 51 say-on-pay-type resolutions in 2007 was 43 percent, according to RiskMetrics Group.
But shareholder-sponsored proposals rarely pass on the first vote and can sometimes take a few years before they catch on.
Bank of New York Mellon Corp. and Morgan Stanley both rejected proposals in recent weeks. But there are companies whose shareholders have a say on compensation, such as Verizon Communications Inc., Blockbuster Inc., Apple Inc., and Aflac Inc.
