2000-2001 Shareholder Resolution Campaign

Household International

Executive Compensation Review

WHEREAS, the sub-prime lending industry has come under increasing public scrutiny for predatory lending directed at low-income people. Several states and the US Congress have held public hearings on predatory lending practices. The state of North Carolina has adopted strict laws imposing restrictions on sub-prime lending practices. Other states are presently considering similar legislation;

Household International's executive officers have made public statements committing to business practices free of predatory lending. We believe our corporate leaders should be evaluated based on their success in meeting these commitments;

Household International has been the subject of numerous protests over its lending policies and practices. These protests have been reported in both national and local media and potentially threaten Household International’s reputation, a vital asset in the marketplace. Among the concerns of community activists is the practice of packaging loans with highly profitable single premium credit insurance. In a June 2000 report on predatory lending the US Treasury Department called lump-sum credit insurance "unfair, abusive and deceptive."

WHEREAS, while Household International makes high interest rate loans to its sub-prime customers, it is also making below-market rate loans to its executives for the purpose of exercising stock options. According to the company’s 2000 proxy statement, the company’s CEO had $2.8 million in outstanding loans from Household International and the top six officers as a group had loans exceeding $7.6 million. These loans had an interest rate of 6.8%, the lowest allowed by the IRS.

WHEREAS, Household International’s executive compensation policies, including such benefits as stock options and access to low interest loans, mirror the broader society by concentrating wealth narrowly in the hands of small numbers of executives;

As of 1999, only 6.2% of Household International’s 28,000 employees held any stock options distributed by the company. In 1999, 20.8% of the company’s total stock option grants went to the company’s CEO alone. In 1999, the company’s top five officers collectively received 43.2% of all options granted;

WHEREAS, we believe that if equity were more broadly shared in our society our company’s business would be strengthened and the risks facing Household International would be lowered;

RESOLVED, the Board shall conduct a special executive compensation review to study ways of linking a portion of executive compensation to successfully addressing the public’s concern about predatory lending practices. Among the factors considered in this review might be: implementation of policies to prevent predatory lending, development of staff training programs about predatory lending, constructive meetings with concerned community groups, and reductions in the levels of predatory lending complaints filed with government bodies. A summary of this review will be published in the Compensation Committee’s report to shareholders.

SUPPORTING STATEMENT
Household International’s officers have stated their strong commitment to high standards of corporate social responsibility. The proposed resolution creates a mechanism for evaluating the company's officers in meeting these objectives and would offer company leaders a positive incentive for establishing Household International as a leader in ending predatory lending practices and ensuring fair treatment of customers.

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