RW - Shareholder Initiatives: General Electric

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Status

Annual meeting held April 16, 2003

% voting YES: 9.9%

Shareholder resolutions face a variety of obstacles. For this reason, it is considered significant if a resolution garners at least 5% of the vote. Votes over 10% indicate exceptional shareholder support for an issue.

Filers of "social-issue" resolutions generally don't expect their resolution to receive a majority vote and be adopted by management. Rather, filers use these resolutions to get management's attention, and to raise the issue with other shareholders. They hope to achieve a vote sufficient to allow them to return the next year.

According to SEC rules, a resolution must receive 3% of the vote the first year it is filed, 6% in year two and 10% thereafter in order to be included on the proxy the following year.

General Electric

A Shareholder Resolution on Pay Disparities

“Whereas, the average chief executive officer’s pay has increased from 42 times in 1982 to 411 times that of the average production worker in 2001 (Business Week Online, May 6, 2002).

“Responding to that statistic, New York Fed President, William J. McDonough acknowledged that a market economy requires that some people will be rewarded more than others, but asked: ‘should there not be both economic and moral limitations on the gap created by the market-driven reward system?’ He stated: ‘I can find nothing in economic theory that justifies this development.’ He called such a jump in executive compensation ‘terribly bad social policy and perhaps even bad morals.’

According to The Wall Street Journal, McDonough cited 'the biblical admonition to ‘love thy neighbor as thyself’ as justification for voluntary CEO pay cuts' beginning with the strongest companies. He said: 'CEOs and their boards should simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels' (September 12, 2002).

“Affirming McDonough’s comments, the Milwaukee Journal-Sentinel editorialized that regulating executive compensation ‘is the business of corporate boards, or should be. Unfortunately, too many corporate directors on company compensation committees simply rubber-stamp decisions made by top managers. That should stop.’ (September 13, 2002).

“In ‘CEOs: Why They’re So Unloved,’ Business Week editorialized: ‘CEO pay is so huge that people don’t believe executives deserve it…In 1980, CEO compensation was 42 times that of the average worker. In 2000, it was 531 times. This is a winner-take-all philosophy that is unacceptable in American society.…The size of CEO compensation is simply out of hand’ (April 22, 2002).

“The Conference Board issued a report acknowledging that executive compensation has become excessive in many instances and bears no relationship to a company’s long-term performance and that changes must be made (September 17, 2002). Commenting on this The New York Times called for ‘Atonement in the Boardroom’ (September 21, 2002), while Warren Buffet said: ‘The ratcheting up of compensation has been obscene.’
“United For a Fair Economy has shown an inverse correlation between very high CEO pay and long-term stock performance.

“Resolved: shareholders request the Board’s Compensation Committee to prepare and make available by January 1, 2004 a report (omitting confidential information and prepared at reasonable cost) to requesting shareholders comparing the total compensation of the company’s top executives and its lowest paid workers both in this country and abroad on January 1, 1982, 1992 and 2002. We request the report include: statistics related to any changes in the relative percentage size of the gap between the two groups; the rationale justifying any such percentage change; whether our top executives’ compensation packages (including options, benefits, perks, loans and retirement agreements) are ‘excessive’ and should be changed; as well as any recommendations to adjust the pay ‘to more reasonable and justifiable levels’.

“Supporting Statement: Our Company fits William J. McDonough’s ‘strong company’ category. Our pay scales should model justice and equity for all our workers. Supporting this resolution would be one step in this direction.”

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