American Home Products

Report on Employee Ownership

WHEREAS, fast-widening economic disparities and growing financial insecurity are endangering American Home Products' broad customer base:

• the financial wealth of the richest 1% of U.S. households now exceeds the combined wealth of the bottom 95%;
• the nation's median household financial wealth is less than $15,000. In the event of job loss, the average American family has enough savings to maintain their current standard of living for just 36 days;
• 44 million Americans lack health insurance;

WHEREAS, these economic disparities are replicated within American Home Products:

• Our company's top five officers collectively exercised nearly $23 million in stock options in 1998;
• These five individuals had an additional $117 million in unexercised stock option gains according to the 1999 proxy statement;

WHEREAS, if these option gains had been divided among the company's 52,984 employees, each employee would have an equity participation of more than $2,600;

WHEREAS, participation in equity markets is a powerful creator of wealth. Broadly distributed wealth enhances social stability;

WHEREAS, employee ownership firms grow faster, create more jobs, foster more employee wealth, and attract and retain higher quality employees;

WHEREAS, research confirms that sustained superior corporate performance is a result of shared values within a firm and contributions from across a broad range of employee skills, not from the efforts of a single employee;

WHEREAS, employee ownership is a positive national trend, with 10,000 companies sponsoring employee stock ownership plans and 31% of large firms offering broad-based stock options, up from 13% in 1995;

WHEREAS, shareholders are getting a poor return for concentrating so much equity in the hands of a small group of managers. For the five years ending in 1998, AHP stock returned 305.6% as compared to the company's self-defined peer group that returned 461.8%. AHP trails its peer group again in 1999 (as of November 1, 1999);

RESOLVED, that American Home Products prepare a report on employee ownership. The report shall provide the following information:

• the known number of shares and in-the-money stock options owned by the company's executive officers;
• the known number of shares and in-the-money stock options owned by employees who are not executive officers;
• an analysis of the benefits derived from concentrating the incentives of ownership narrowly within the firm;
• any strategies or plans for broadening employee ownership, including for employees outside the United States.

This report shall be prepared at a reasonable cost and may omit confidential information. It should be available to shareholders by September 30, 2000.

SUPPORTING STATEMENT

American Home Products' financial performance relative to its peers would suggest that current compensation policies are ineffective in generating competitive returns relative to industry peers. There is a growing body of evidence that suggests companies with broad employee ownership grow faster, create more jobs and have more satisfied and productive employees, creating benefits for both employees and shareholders.

Please vote FOR this resolution.

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