Raytheon

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 layof fs, 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 1998, Raytheon announced that it would lay off 14,000 employees by the end of 1999. In April 1999, the company increased this estimate to 15,400 job cuts. In October 1999, Raytheon management announced an additional 2,400 employees would lose thei r jobs. Raytheon management argued these layoffs would reduce costs and boost profits.

WHEREAS, large layoffs in the recent past have not resulted in the improved financial health promised by Raytheon's top managers;

WHEREAS, since the layoffs were announced, Raytheon's profits have continued to decline and its stock price has dramatically underperformed its competitors. Between January 1, 1998 and November 23, 1999, Raytheon's Class A stock lost 35.8% of its value (including dividends). During the same period the S&P Aerospace/Defense Index declined 12.8% and the S&P 500 rose 48.6%.

WHEREAS, despite having publicly announced the need to cut costs, Raytheon\rquote s executives were granted and accepted generous increases in their compensation in 1998. Excluding Mr. Burnham, who did not serve the company during 1997, the company\rquote s top four officers collectively enjoyed increases in salary and bonus of more than 30% in 1998 (representing $1.79 million, or an average raise of $449,000 per officer). Each of these men also received at least 33% more stock options in 1998 than they did the previous year;

WHEREAS, we believe that asking employees to sacrifice, while at the same time enriching executives, sends a poor 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;

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 2% of the company's workforce or 1,000 workers lose their jobs. This pay freeze shall continue for a one year period following the completion of the layoffs.

SUPPORTING STATEMENT

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.

PLEASE VOTE YES.

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