April 22, 2009
AFL-CIO Denounces CEO Pay Practices
– Ted Allen, RiskMetrics’ Director of Publications
The AFL-CIO has launched its 2009 Executive PayWatch that highlights what the labor federation views as the 10 “worst” corporate pay practices. “Americans are rightly angered by CEOs who haven’t learned their lesson,” AFL-CIO Secretary-Treasurer Richard Trumka, said in an April 14th press release. “After driving the economy into the ground and gambling with the nation’s retirement savings, these same corporations are giving out huge bonuses for bad behavior.”
Among the pay practices criticized by the AFL-CIO are:
– A proposed grant of $7.7 million in stock options to CEO James Wells at SunTrust Banks, which has received $4.9 billion in federal support from the Troubled Asset Relief Program.
– The more than $500 million in salaries and retention payments paid by American International Group to senior employees since the company was rescued by the federal government, which has spent $170 billion to keep the insurance company operating.
– The changing of performance goalposts, such as the steps taken by homebuilder Toll Brothers after it became clear that CEO Robert Toll would not receive a bonus under the old standards. According to the AFL-CIO, the company now ties the CEO’s bonus to a percentage of its income before taxes and bonus, as well as “squishy” factors, such as “management enhancement and efficiencies, and financial market visibility and access.”
– “Lavish” perquisites, such as the $400,000 in tax preparation and financial planning services provided to Ray Irani, the chief executive of Occidental Petroleum.
– “Golden coffin” benefits, such as the more than $40 million in stock, life insurance, and other benefits that the heirs of Shaw Group CEO James Bernhard would receive if he dies.
-“Golden parachute” benefits, such as the $14 million exit package that Richard L. Bond was to collect after stepping down as chief executive of Tyson Foods in January.
In addition, the AFL-CIO has filed 17 proposals this year that seek advisory votes on compensation, investor votes on death benefits, more disclosure on compensation consultants, hold-through retirement rules for equity grants, and other pay reforms, according to RiskMetrics data.