Allied Signal

A Shareholder Resolution Concerning Executive Compensation

WHEREAS, during the period 1990-98, corporate profits rose 108%, the S&P 500 rose 224%, and CEO pay rose 481%. During the same period, the average worker's pay rose 28%, barely more than inflation;

WHEREAS, the average large company CEO made 419 times more than the average manufacturing worker in 1998 (Business Week). If the pay of the average manufacturing worker had increased as fast as CEO pay between 1990 and 1998, it would today be $110,399, rather than $29,267. If the minimum wage rose as fast as CEO pay it would today be $22.08/hour, not $5.15/ hour;

WHEREAS, though U.S. multinational corporations see themselves as global companies, taking advantage of global labor markets, they continue to pay their executives at levels far surpassing international standards. CEOs in Germany, Japan, and the United Kingdom make well less than 50 times the pay of average manufacturing workers;

WHEREAS, AlliedSignal's CEO made $14.1 million in 1998, 481 times the average U.S. manufacturing worker and more than 2,800 times the average wage for Mexican maquiladora workers (about $5,000 a year), a nation where Allied Signal continues to expand;

WHEREAS, Allied Signal's efforts to cut costs have been disproportionately focused on the factory floor, cutting more than 11,000 jobs since 1995, while costs in the executive suite and the board room continue to climb.

WHEREAS, a growing body of research suggests that wide wage gaps within organizations can undermine the firm's mission. A 1992 study by the Haas School of Business at the University of California at Berkeley found that firms with the widest pay gaps experienced lower quality. A study published in the Journal of Organizational Behavior found that high levels of executive compensation generated cynicism among white-collar workers;

WHEREAS, finance magnate J.P Morgan espoused the opinion that CEOs should not make more than 20 times the compensation of the average employee. Modern management consultant Peter Drucker has similarly argued for CEO pay no higher than 25 times the average worker;

THEREFORE, BE IT RESOLVED, that shareholders urge the Board of Directors to address the issue of runaway remuneration of CEOs and the widening gap between highest and lowest paid workers by:

1. Establishing a cap on CEO compensation expressed as a multiple of pay of the lowest paid worker at Allied Signal;
2. Preparing a report for shareholders explaining the determinations used in order to determine the appropriate cap.

SUPPORTING STATEMENT: Last year, this resolution drew the support of 12% of AlliedSignal's shareholders. With the transition in CEO leadership comes the opportunity for a fresh start on executive pay policies. Through the financial discipline of a pay cap, we hope our company can help reverse a long- standing trend that is neither good for business nor society. Please vote YES.

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