2000-2001 Shareholder Resolution Campaign

Raytheon

Executive Compensation Review

WHEREAS, despite record profitability in the 1990s, U.S. corporations, including Raytheon, have also laid off record number 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;

WHEREAS, 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 products and services. A study published in the Journal of Organizational Behavior found that high levels of executive compensation generated cynicism among white-collar employees;

WHEREAS, firms with large pay gaps between CEOs and other executives experience executive turnover at twice the rate of firms with a more equal distribution of pay among executives according to a 2000 study by Notre Dame University (Source: Wall Street Journal, April 6, 2000);

WHEREAS, Raytheon has announced the layoffs of more than 18,000 employees between 1998 and 2000;

WHEREAS, Raytheon experienced a bitter four week strike by 3,000 unionized workers in 2000;

WHEREAS, professional employees of Raytheon expressed concern and frustration at last year’s Raytheon annual meeting after learning that CEO Daniel Burnham received a $900,000 bonus in 1999 after informing employees that there would be no bonuses available for them due to the poor performance of the company;

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, we believe that Raytheon’s workforce is one of the company’s most prized assets and that it is management’s responsibility to implement policies and practices that keep the workforce satisfied and productive;

RESOLVED, shareholders request that the Board conduct a special executive compensation review. The review shall look for ways to link a portion of executive compensation to measures of employee satisfaction, including consideration of employee surveys and employee turnover data. The results of this review will be summarized in the Compensation Committee’s report to shareholders.

SUPPORTING STATEMENT
Several leading companies, including IBM, Bristol-Myers Squibb and Procter & Gamble consider measures of employee satisfaction in setting executive pay. As shareholders, we are concerned about the long-term effects of continuing layoffs, contentious strikes, and executive pay practices which reward executives with bonuses while at the same time denying bonuses to other employees. In the current tight labor market it is vitally important that Raytheon be a highly desirable place to work. This resolution creates a direct and positive incentive for management to establish Raytheon as a great place to work. PLEASE VOTE YES!

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