2002 Shareholder Advocacy Campaign

Over the last five years, Responsible Wealth members have introduced more than 40 shareholder resolutions calling upon corporations to examine and change their executive compensation practices. In a few cases, companies have accepted our suggestions and changed their policies. In most cases, our resolutions have been printed in proxy statements that are sent to millions of shareholders, then presented and voted on at the annual meeting. We believe that shareholder resolutions are a valuable tool for education and social change.

This year, we will be filing resolutions at the following companies:

Link CEO Pay to Reducing Predatory Lending

The sub-prime lending industry, the dominant financial service provider in low income communities and among people of color and the elderly, has been the fastest growing part of the financial services industry. Fair housing activists have identified several abusive lending practices, termed "predatory lending." Among these practices are: charging excessive interest rates relative to the credit risk of the borrower, excessive fees, significant pre-payment penalties (a practice virtually eliminated in conventional mortgage markets), and aggressive marketing practices that result in loan-flipping. The Coalition for Responsible Lending estimates that predatory practices cost borrowers $9 billion a year. Several states have adopted laws restricting lending practices deemed abusive. Responsible Wealth is working with ACORN and Self-Help Credit Union, two leaders in the fight against predatory lending, in filing these resolutions.

• Citigroup • Partners: Self-Help Credit Union and Coalition for Responsible Lending • Institutional Co-Filers: Advocacy Fund, Northstar Asset Management
• Countrywide Credit
• Household International • Partner: ACORN • Institutional Co-Filers: Northstar Asset Management, Domini Social Investments

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Freeze CEO Pay During Periods of Downsizing

For many years, the ethic in executive compensation practice has been to reward executives who execute large cost-cutting layoffs with significant pay increases. There is a growing body of academic evidence that suggests layoffs may create a minor boost in short-term profitability, but that over the longer term, they hurt productivity and profitability. During the last year we have seem glimmers of hope as executives of Ford Motor and several airlines announced executive pay freezes or reductions during periods of employee layoffs. We believe the rewards and the sacrifices of the business enterprise should be shared equitably, thus this resolution asks that executive pay be frozen during periods of large layoffs.

• AOL Time Warner • Institutional Co-Filer: Northstar Asset Management

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Expand Shareholder Choice of Board Members and Expand Board Diversity

One of the most pervasive myths in corporate America is that shareholders elect the Board. We know of no public company in America that puts up more Board nominees than there are seats to be filled. We have people leading businesses that are often engaged in intense competition while those leaders themselves are unwilling to compete for their positions. We believe such problems as runaway CEO pay, and difficulties with employee relations, environmental management, and human rights controversies often have a common thread – who is at the table in the corporate board room. Many corporate boards are dominated by company insiders and people who are themselves CEOs of businesses. Today’s multinational businesses operate at the complex intersection of many stakeholder interests. This resolution seeks to give shareholders real choice in electing directors, including the choice of directors with different backgrounds and areas of expertise.

• Exxon Mobil • Institutional Co-Filer: Northstar Asset Management

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Create an Independent Board of Directors

The Board of Directors represents the voice of shareholders in governing the company. While most major US companies have policies in place to assure that their Boards are made up of independent, non-affiliated directors; some large firms have yet to embrace this important principle. When Boards are dominated by insiders – direct employees of the company or others who receive compensation for their professional services to the company – it creates inherent conflicts of interest. How can a Board where a majority of directors report to the CEO as employees also be responsible for setting the CEO’s compensation? This resolution asks companies to take the steps necessary to assure Board independence in the future.

• General Electric

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Assure Pension Equity for All Employees

One of the most prized benefits for many working Americans is their pension. Over the last few years many companies have changed their pension plans, reducing the expected benefits of long-tenured workers, reducing the company matches in popular 401(k) plans, and shifting the risk for pension assets from companies to their employees. All of these changes have been made for one principle reason: to save corporations money. One of the most controversial of these changes is conversion to a cash balance pension plan. Companies argue that these plans allow younger workers to accrue pension benefits more quickly. However, if older workers are not given a choice between the new cash balance plan and the old traditional plan, these long-tenured workers stand to lose 30% or more of the pension benefits they had been planning on. While some companies have given affected workers a choice of which plan they wanted to cover them, others have not. This resolution asks that all workers vested at the time of conversion be given a choice of the cash balance plan or the traditional plan.

• AT&T (Responsible Wealth is co-filer of this resolution, sponsored by Domini Social Investments) Partner: AT&T Concerned Employees Council on Retirement Protection

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Link CEO Pay to Employee and Customer Satisfaction

Happy customers and satisfied employees are the key to long-term success in any business. Unfortunately, in today’s market, driven so intensely by quarterly earnings, cost-cutting decisions impede the corporation’s priority for satisfied employees and customers. Several leading American companies, including IBM, Eastman Kodak, Bristol Myers Squibb and Procter & Gamble have begun to include measures of employee, customer and even community satisfaction as components in determining a portion of CEO pay. This resolution embraces the policies of these leading companies as a way of focusing corporate leaders on the needs of all of the companies’ stakeholders.

• FleetBoston Financial

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Limit the Concentration of Stock Options

The explosion of CEO pay in the 1990s stemmed largely from huge stock option grants to corporate executives. We agree that options do align the interests of shareholders and employees, however we think these powerful wealth-creating vehicles would create incentives for all workers, not just handfuls of executives. Whether small option grants are universally made to all employees, as some companies have done, or whether options are set aside in an Employee Stock Ownership trust for all employees to share, as no company has yet tried, we nonetheless strongly believe that all who create wealth should share in it. This resolution asks that in companies with huge concentrations of options in executive’s hands, no single officer receive more than 5% of the options granted in a single year, and that the executive officers as a group receive no more than 10% of the options granted in a single year.

• Disney

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Adopt a Corporate Governance Principle Affirming the Commitment to Physical Annual Meetings

Annual meetings represent the one time each year when management must be present and accountable to shareholders and other stakeholders. As such, annual meetings serve an important function in a democratic society. There are concerted efforts underway to eliminate face-to-face annual meetings. While these efforts are advanced under the guise of increasing annual meeting accessibility through the internet (a practice we strongly endorse), the Trojan House of these efforts is that those firms holding internet meetings may eliminate their physical annual meetings. The State of Delaware, the chartered home of more than half of the nation’s large companies, passed such a law in 2000. Though no corporation has yet availed itself of the law to hold an internet-only meeting, the trend is spreading to other states.

In late summer 2001, Massachusetts narrowly averted such a bill aggressively pushed by EMC Corporation. The bill was stopped at the 11th hour after a concerted high-profile media effort by Responsible Wealth’s parent organization, United for a Fair Economy, together with the Neighborhood Assistance Corporation of America, and several Boston-area social investment groups. This resolution asks EMC to adopt a corporate governance policy affirming the company’s commitment to face-to-face annual meetings and to adjust its other corporate policies (e.g. its lobbying practices) accordingly.

• EMC (RW is acting as co-filer of the resolution sponsored by Walden Asset Management • Institutional Co-Filer: Northstar Asset Management

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