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March 19, 2004

They have the right

Washington Mutual Savings Bank's proxy materials contain an interesting resolution this year: a limit on the compensation of the bank’s CEO, offered by the Sheet Metal Workers’ National Pension Fund. (To read it, search the proxy file for “sheet metal.”)

The Sheet Metal Workers would limit CEO Kerry Killinger to a salary of $1 million--his actual salary for the past three years--plus a bonus of no more than $1 million, which would be a pay cut. (Search the proxy file for “summary compensation table” or look in The Seattle Times.

Carol Bowie, director of governance research at the Investor Responsibility Research Center writes: “This is what is known as the ‘Commonsense Executive Pay’ proposal, which has been filed at 85 companies that we know of this year, mainly by pension funds of the building trade unions (Carpenters, Plumbers, Sheet Metal Workers, etc.).

“This one asks for…quite restrictive caps on pay (by American standards at least), e.g., maximum $1 million salary, $1 mil bonus, $2 mil severance package, etc.). Executive pay proposals in general have become quite numerous in the last few years, and support for them has been increasing, but proposals seeking these kinds of restrictions generally don't get high support from shareholders (average support last year for proposals seeking to "restricted executive compensation" was 15.4% of votes cast.”

From my days as a business reporter, 15.4% of votes cast for a resolution opposed by the directors (as this one is) would be a lot.

My own thoughts are not definite. Kerry Killinger is a well-regarded executive of a Seattle company that has become nationally successful. He’s worth a big salary. Whether he’s worth more or less than what he is paid I really don’t know. I doubt if the management of the Sheet Metal Workers’ Pension Fund knows either, which is why I probably would not vote for their resolution were I a shareholder.

But I would grant the Sheet Metal Workers Pension Fund one thing: as owners of 28,095 shares of WM, they are co-owners of the company, and as such, should have every right to make a proposal about how much to pay the executive who runs it.

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Posted by Bruce Ramsey at March 19, 2004 04:45 PM



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