Huffy

A Shareholder Resolution on Executive Pay and Downsizing

WHEREAS, despite record profitability in the 1990s, U.S. corporations have laid off record numbers of workers, arguing that cost-cutting is one key to long-term competitiveness and increased profitability;

WHEREAS, only 44% of firms that downsized employees saw a rise in operating profits, according to a 1992 study by the American Management Association. The same study found that only 31% of corporate downsizers experienced productivity gains following the layoffs, while 77% experienced deterioration in employee morale. A second study of 1,000 large companies conducted by the Wyatt Company found that less than one-third of the companies surveyed hit profit targets projected at the time of the restructuring.

WHEREAS, in July, 1998 Huffy Corporation closed its Celina, Ohio plant, eliminating the jobs of 975 employees, many of whom had decades of services with the company. The company justified this plant closing by explaining the need to cut costs. Yet while cost cutting on the factory floor was disrupting the lives of workers, costs in the executive suite rose handsomely. For the year 1998, Huffy's CEO saw his cash compensation rise 11.4% over 1997;

WHEREAS, as a consumer products company, Huffy is dependent on its customers having both sufficient disposable income to purchase its products and sufficient leisure time to enjoy its products. Widespread downsizing has played a significant role in two important trends: 1) the average manufacturing worker in America has received an inflation-adjusted wage increase of just 5.5% since 1990; 2) the average employee worked 83 more hours in 1998 than in 1980 - a loss of more than two weeks of leisure time.

WHEREAS, since the Celina plant closing, Huffy's profits have continued to wither. Two additional bicycle plants have been closed, resulting in job loss for 600 additional Huffy employees. Shareholders have also suffered. Huffy's stock price declined 41% from the date of the Celina plant closing through October 19, 1999. During this same period, the S&P 500 stock index rose more than 12%;

WHEREAS, we believe that asking employees to sacrifice, while at the same time rewarding executives, sends a mixed message to employees, suppliers and shareholders. We believe that business success over the long term is enhanced when business is viewed as a shared enterprise in which both the rewards and sacrifices are equitably shared among all employees;

WHEREAS, corporate leaders should have a long-term view when making management decisions. If decisions to cut costs are in the long-term best interest of the company, executives should be willing to defer their rewards until positive results are demonstrated. Rewarding cost-cutting executives for potentially good future performance is in conflict with standards of good corporate governance.

RESOLVED, shareholders request that the Board adopt an executive compensation policy that freezes the pay of corporate officers during periods of downsizing in which the lesser of 5% of the company's workforce or 200 workers lose their jobs. This pay freeze shall continue for a one-year period following the completion of the layoffs.

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