July 3, 2012
July 3, 2012
State Treasurer says salaries for executives should be better connected to company performance
By Oregon State Treasurer
Oregon is helping to shine a spotlight on corporate compensation practices, with the goal of helping companies to be more responsible and more profitable. Oregon beneficiaries of public trust funds such as the Oregon Public Employees Retirement Fund and Oregon Common School Fund are major investors in public companies. Because of those holdings, those public funds are represented at corporate annual meetings – and they voiced objections this year to 74 executive salary packages that were deemed to be among the most excessive.
Federal legislation gives shareholders the opportunity to make their voices heard when it comes to compensation at public corporations, through advisory referendums known as “Say on Pay” votes.
“Oregon funds have the opportunity and an obligation to speak out when companies are not acting in the best interests of shareholders,” said State Treasurer Ted Wheeler, who sits on the Oregon Investment Council. “Compensation for executives should be in proportion with the profitability of the company, and in step with their business peers.”
Oregon’s proxy voting at annual meetings is managed by San Francisco-based Glass, Lewis & Co., which was hired by the Oregon Investment Council. The Council is responsible for setting the state’s investment policies, which are then administered through the State Treasury.
Most corporations hold annual shareholder meetings during the first half of the calendar year.
Proxy votes are one method that Oregon employs to push for corporate responsibility and accountability. The Treasury also communicates directly with executives and authorizes lawsuits if business practices diminish the value of Oregon holdings.
While “Say on Pay” votes are advisory, they have proved to make a difference. Oregon funds helped to trigger heightened scrutiny of Citigroup Inc. in April when a majority of shareholders opposed the compensation plan. The chief executive of Citigroup was paid $14.8 million in salary in 2011 and promised an extra $10 million in 2013 as “retention pay,” even though independent analyses showed the banking giant was less profitable than its peers.
Citigroup is the largest company, in terms of market value, to have its executive pay plan rejected by a majority of shareowners.
Glass, Lewis & Co. evaluates corporate compensation policies and grades them, with the lowest-possible score an “F.” Citigroup was among those in that “failing” category.
Oregon funds also voted against the CEO salary packages of 73 other “F-rated” firms. The diverse slate for which Oregon voted “no” included Monsanto, JC Penny Inc., Northrop Grumman Corp., American Eagle Outfitters Inc., and E-TRADE Financial Corp.
The State Treasury protects public assets and saves Oregonians money through its investment, banking, and debt management functions. State investment policies are overseen by the Oregon Investment Council. The State Treasury also promotes public outreach and education to help Oregonians learn strategies to save money, invest for college and make smart financial choices. You can track Treasury-related news on Twitter at @OregonTreasury and view photos at www.flickr.com/photos/oregontreasury.