Procter & Gamble – Extended Producer Responsibility
WHEREAS
Product packaging is a significant consumer of natural resources and energy, and a major source of waste and greenhouse gas (GHG) emissions. More than half of U.S. product packaging –37 million tons – is discarded in landfills or burned rather than recycled.
Packaging comprises nearly one-third of all U.S. landfill waste. Nestle Waters North America says plastic bottles are the largest contributor to its carbon foot print; Coca-Cola Co. reports packaging is the largest part of the carbon footprint of several products. A recent analysis of U.S. Environmental Protection Agency data estimates that the energy needed to produce and dispose of products and packaging accounts for 44% of total U.S. GHG emissions. Decaying paper packaging in landfills forms methane, whose greenhouse warming potential is 72 times more potent than C02. Metal and plastic packaging has large embodied energy and emissions profiles because of the high costs of producing those packages from mining/smelting and petroleum respectively.
Extended Producer Responsibility (EPR) is a corporate and public policy that shifts accountability for collection and recycling from consumers and governments to producers. For instance, Coca-Cola, PepsiCo and Nestle Waters North America have each made public commitments to recycle a majority of beverage containers sold over the next six to eight years.
In many other countries, consumer packaged goods companies are responsible for post-consumer packaging. Companies operating in Europe and Canada are required to pay some or all costs for packaging collection and recycling. More than half of Organization for Economic Cooperation and Development member countries have EPR packaging systems in place. In Ontario, Canada, producers pay half of packaging collection and recycling costs. EPR programs in Austria, Belgium and Germany recover far higher rates of packaging than the U.S. EPR laws in 24 U.S. states already mandate producer responsibility for collection and recycling of consumer electronics.
Producers control design and marketing decisions, and so are best positioned to reduce the overall environmental impact of product packaging and internalize costs. Increased recycling of packaging can yield strong environmental benefits, leading to more efficient use of materials, reduced extraction of natural resources, and fewer GHG and toxic emissions. EPR mandates can create new economic markets for packaging. Increased economic incentives to recycle more types of packaging will keep it from flowing into waterways and oceans where it imperils marine life.
RESOLVED
Shareowners of Procter & Gamble request that the board of directors issue a report at reasonable cost, omitting confidential information, by February 1, 2012 assessing the feasibility of adopting a policy of Extended Producer Responsibility for post-consumer product packaging as a means of reducing carbon emissions and air and water pollution resulting from the company’s business practices, and describing efforts by the company to implement this strategy.
SUPPORTING STATEMENT
Proponents believe policy options reviewed in the report should include taking responsibility for post-consumer package recycling, and participating in development of producer financed and managed EPR systems.
Smucker’s – Environmental and Social Risks of Coffee
WHEREAS
Our company is one of the four largest coffee companies in the world. It provides industry leadership through its Folgers brand not only in consumer expectations, but also with regard to pricing.
The coffee business is critically important for our company by providing approximately 40% of our company’s revenue. It is equally important to the well-being of 25 million coffee farm families worldwide.
Climate change may present a number of important risks and opportunities for our company and these communities, as it impacts temperature, rainfall patterns, and disease vectors in the world’s coffee growing regions. According to the Intergovernmental Panel on Climate Change, physical risks from climate change may include changes and variability in precipitation and in the intensity and frequency of extreme weather events.
The director of research at Kenya’s Coffee Research Foundation publicly stated, “We have seen climate change in intermittent rainfall patterns, extended drought and very high temperatures.” He goes on to point out that “Coffee operates within a very narrow temperature range of 19-25 degrees (Celsius). When you start getting temperatures above that, it affects photosynthesis and in some cases, trees wilt and dry up.”
Peter Baker, coffee expert at the nonprofit CABI Bioscience, publicly stated “I often call coffee a Goldilocks plant. It likes it not too hot, not too cold. It likes it not too wet, not too dry. It doesn’t like too much sun, it doesn’t like too much shade.”
Our [c]ompany’s competitors in the coffee business – Nestle, Kraft Foods, and Sara Lee Corporation – are making public efforts to address coffee sustainability and to provide for a consistent and reliable supply chain of quality coffee. All three have made public commitments to sourcing coffee in a more sustainable fashion.
While the company’s 2010 10-K identifies climate change as a risk factor, it does not provide any discussion of what the company will do to address those risks and the role of corporate responsibility in its coffee business. It also does not discuss the opportunities for the company to become a leader in environmentally and socially sustainable coffee farming.
RESOLVED
Shareholders request that within six months of the 2011 annual meeting, the Board of Directors provide a report to shareholders (at reasonable cost and excluding confidential and proprietary information) describing how the company will manage the social and environmental risks and opportunities connected to the company’s coffee business and supply chain. We recommend the Board include in the report a concise discussion of how it will address temperature changes, changes in rainfall patterns, and the company’s responsibility for its impact on the coffee farming families in its supply chain.
Sysco – Climate Change Related Water Risk
RESOLVED
Shareholders request that by April 2012, the Board of Directors provide a report to shareholders (at reasonable cost and excluding confidential and proprietary information) on how Sysco is assessing water risk to its agricultural supply chain and action it intends to take to mitigate the impact on long-term shareholder value.
SUPPORTING STATEMENT
Water management is an emerging strategic business issue. The Securities and Exchange Commission states in its 2010 “Guidance Regarding Disclosure Related to Climate Change”, that climate change and water may challenge companies “dependent on suppliers that are impacted by climate change, such as companies that purchase agricultural products from farms adversely affected by droughts or floods.” http://www.sec.gov/rules/interp/2010/33-9106.pdf
Our company acknowledges the business risk of climate change and water shortages in section 1A of its 2010 Annual Report. However, additional information on its efforts to mitigate the risk of water management is limited to a brief mention in its 2010 Sustainability Report, where Sysco states that in 2009 it began tracking irrigation water used in its integrated pest management program (a relatively small proportion of its agricultural supply chain).
The United States Department of Agriculture (USDA) reported in 2009 that “No matter the region, weather and climate factors such as temperature, precipitation, CO2 concentrations, and water availability directly impact the health and well-being of plants, pasture, rangeland, and livestock.” Specifically, climate change affects average temperatures and temperature extremes; timing and geographical patterns of precipitation; snowmelt, runoff, evaporation, and soil moisture; the frequency of disturbances, such as drought, insect and disease outbreaks, severe storms, and forest fires; atmospheric composition and air quality; and patterns of human settlement and land use change, which directly impact crop yields and meat production. http://www.usda.gov/img/content/EffectsofClimateChangeonUSEcosystem.pdf
A JPMorgan Global Equity Research report on water entitled “Watching Water – A Guide to Evaluating Corporate Risks in a Thirsty World” states that an inadequate supply of water in a food company’s agricultural supply chain presents several serious risks. Specifically it argues, “water-related disruptions in the agricultural supply chain may have a dramatic impact on the industry’s economic performance.”
Sysco was invited to participate in both Carbon Disclosure Project (CDP) and its companion survey, CDP Water Disclosure. CDP is an independent not-for-profit organization that holds the largest database of primary corporate climate change information in the world. The company has declined to participate in either survey, even though 95% and 65% (respectively) of companies in the same sector responded.
Leading food companies such as Unilever, General Mills, and Sodexo evaluate their agricultural supply chain and incorporate water scarcity and climate risks into their sustainability strategy and business planning. For investors in corporations with extensive agricultural supply chains, information about their exposure to and management of water risk is essential to the evaluative process. We believe the adoption of a sound water risk management plan will offer Sysco competitive advantage and enhance opportunities for long-term sustainability for the company and its shareholders.
JP Morgan – Board Membership in the U.S. Chamber of Commerce
WHEREAS
Many investors are concerned about our company’s role as a Board member of the U.S. Chamber of Commerce given a number of high profile as well as partisan positions by the trade association that may contradict our company policies and programs.
JP Morgan is a key part of the decision-making process that shapes the work of the U.S. Chamber. The web site of the U.S. Chamber describes the role of Directors as follows: “Directors determine the U.S. Chamber’s policy positions on business issues and advise the U.S. Chamber on appropriate strategies to pursue. Through their participation in meetings and activities held across the nation, Directors help implement and promote U.S. Chamber policies and objectives.”
JP Morgan believes, with good cause, that the U.S. Chamber is a constructive leader for business on many issues and wishes to continue its members in the Chamber. Since our company has a Director on the Board, investors are likely to assume that our management stands firmly behind the U.S. Chamber’s lobbying, political spending, legal actions and public statements on major policy issues.
Yet we know that many companies have expressed deep concerns about the disconnect between their own policies and the positions of the U.S. Chamber, including its:
- Strident, politically partisan positioning during recent elections.
- Hostile opposition to climate change legislation and decision to sue the U.S. Environmental Protection Agency to limit its ability to regulate carbon emissions.
- Defense of BP after the oil spill.
- Pledge to dismantle healthcare reform and to help unseat members of Congress who voted for the legislation.
- Petitions to the Department of Labor challenging investors who, in exercising their fiduciary responsibilities, consider environmental, social and governance factors in company engagements and proxy voting.
- Recent announcement in November 2010 of an initiative to oppose new regulations being proposed in the implementation of the Dodd-Frank bill.
Many companies, and investors, that are committed to sustainable business practices are very concerned about these and other actions of the U.S. Chamber. However, Chamber Board members representing companies who share these concerns often do not exercise their responsibility to shape its policies and programs, nor do they challenge initiatives that they believe undercut their own business actions or explain publicly what their own positions are when the Chamber lobbies speaks out or sues.
A number of our company’s own policies and programs the environment, climate change and political spending stand in stark contrast to the actions of the U.S. Chamber. We believe that our company should utilize its position on the U.S. Chamber Board to advance Pfizer’s positions and help protect our reputational and competitive position. Passive acceptance by Directors of the U.S. Chamber is neither good governance nor responsible oversight.
With an organization as visibly aggressive as the Chamber, it is vitally important for our company and its Board member to have a plan on how to advance your positions and turn the Chamber in another direction if necessary.
Hence, investors plan to present the following resolution for action at the 2011 stockholders meeting. We are hopeful that this resolution will encourage our Board and senior management to re-evaluate our role as a Board member of the U.S. Chamber of Commerce and to take the necessary steps to end the contradictions between our company’s policy positions and those of the U.S. Chamber.
RESOLVED
The shareholders request that the Board of Directors initiate a review of our role on the Board of the U.S. Chamber of Commerce that includes an evaluation of:
- The consistency between the U.S. Chamber’s policies and our company’s priority environmental, social and governance (or corporate responsibility) policies and programs. As part of this process, particular focus should be on the Chamber’s new regulatory initiative to block or stall emerging regulation through legal suits or pressure on congressional representatives and regulators.
- Options to distinguish, as necessary, our company’s position from that of the U.S. Chamber such as:
- Stating publicly that the Chamber’s position does not reflect our company’s views on specific issues;
- Requesting that the Chamber state publicly that members have different and varied positions;
- Working with other Board members to ensure varying and diverse opinions are expressed at the Forum in a democratic process.
- Dues and additional payments made, how they are utilized, and if any restrictions should be placed upon them (e.g. limits on monies used for political spending and specific election contests).
- The governance of the U.S. Chamber and our role as a Board member, including oversight and checks and balances, and our responsibilities with respect to Chamber programs and initiatives. This process should also address how Board members evaluate and provide feedback on the performance and compensation of the Chamber’s CEO.
- How our company can engage more effectively with investors and other stakeholders on this issue.
The results of this review should be made available to investors by October 1, 2011.
Strong Support from Chevron Shareholders for Proposal Co-Filed by Trillium
STRONG SUPPORT FROM CHEVRON SHAREHOLDERS FOR PROPOSAL TO STRENGTHEN DIRECTORS’ ENVIRONMENTAL EXPERTISE
May 26, 2010, Houston – The proponents of a stockholder proposal at Chevron Corporation seeking greater board environmental expertise hailed the 27% in support it received, according to preliminary results released by the company.
“As a businessman and investor, I know how important it is to have the right leadership in a firm,” said Rob McCord, Pennsylvania’s independently-elected State Treasurer. “The recent and tragic Gulf disaster should remind all executives and investors that trust matters — and so do contingency plans. This awareness should prompt Chevron to improve all its planning and its preparedness, and one step is to recruit directors with substantial environmental expertise,” McCord added. “Without this, shareholders face significant and unacceptable legal, regulatory, and market risk. And they will — justifiably –lack trust.”
“The high level of investors support for this resolution is indicative of rising frustration with Chevron’s environmental performance, domestically and internationally,” said Shelley Alpern, vice president at Trillium Asset Management Corporation, the lead proponent of the proposal who represented the proponents at the shareholder meeting.
“We are confident that this sends a message that management cannot ignore,” said Patrick Doherty, a spokesperson for the New York State Common Retirement Fund, which supported the proposal.
At today’s lively meeting, shareholders also expressed high level of support (25%) for a resolution questioning the company’s country selection guidelines in light of its ongoing operations in Burma. In addition, Chevron denied admission to the annual meeting to 30 legal proxy holders, giving no reasons for not allowing then to enter. Three legal proxy holders were arrested. Trillium’s Shelley Alpern told board inside of meeting that “This is outrageous and reflects very poorly on our company’s respect for the laws that govern our proxy process in the United States.”
The proposal points to Chevron’s controversial operations in Ecuador, Nigeria and Kazakhstan, stating “We believe that these controversies have the potential to damage shareholder value and that the company must respond to environmental challenges in an effective, strategic and transparent manner in order to restore trust and minimize the adverse impact of its operations.” It called for Chevron to add an independent director to the board who has a “high level of expertise and experience in environmental matters relevant to hydrocarbon exploration and production and is widely recognized in the business and environmental communities as an authority in such field,” as board openings arise. Chevron’s board membership criteria make no mention of environmental expertise. Current board members’ profiles indicate no specific expertise in environmental issues relevant to the oil and gas sector.
# # # #
About the proponents
Trillium Asset Management Corporation is a Boston-based, independent investment management firm devoted exclusively to sustainable and responsible investing.
As chief executive of the Pennsylvania Treasury, Treasurer Rob McCord directly invests more than $11 billion per year, and oversees Treasury’s role as the Commonwealth’s checkbook – last year alone, Treasury processed over 60 million disbursements totaling more than $70 billion. The Pennsylvania Treasury is an independent executive office created by the Constitution of the Commonwealth of Pennsylvania. The State Treasurer is the custodian of the funds of virtually all state agencies, with the responsibility for monitoring and safeguarding money and securities.
Amnesty International USA is a Nobel Prize-winning grassroots activist organization with over 1.8 million members worldwide. Amnesty International undertakes research and action focused on preventing and ending grave abuses of the rights to physical and mental integrity, freedom of conscience and expression, and freedom from discrimination, within the context of its work to promote all human rights. Amnesty International USA (AIUSA) is the U.S. Section of Amnesty International.
Verizon – Free and Open Internet
WHEREAS
The Internet has become a defining infrastructure of our economy and society; Internet Service Providers like Verizon forge rules that shape, enable and limit Internet use.
Federal Communication Commission (FCC) Chairman Genachowski recently noted that a free and open Internet is an “unprecedented platform for speech, democratic engagement, and a culture that prizes creative new ways of approaching old problems.” A free and open Internet, he said, demands Americans’ attention because the Internet must play a critical role in solving the “great challenges [we face] as a nation right now, including health care, education, energy, and public safety.” He asserted: “We have an obligation to ensure that the Internet is an enduring engine for U.S. economic growth, and a foundation for democracy in the 21st century.”
These issues have attracted considerable public interest since at least 2005 when the FCC first articulated open Internet principles and may present financial risk to the company.
The widespread interest in a free and open Internet (so-called “net neutrality”) is echoed by recent letters from hundreds of organizations including the American Library Association, Writers Guild of America, West, National Gay and Lesbian Task Force, and Consumer Federation of America. As a letter from minority advocates put it, applications of net neutrality principles “to wireline and wireless networks are essential for extending the proven benefits of the Internet to poor people and people of color.”
Hundreds of federal and state legislators have written to the FCC on these issues. Congress is now considering the Internet Freedom Preservation Act and the Internet Freedom Act. The FCC is also considering a proposed rule.
Verizon’s opposition to the FCC’s proposed rule-making was formulated and announced even before the proposed changes were made public in October 2009. One day earlier, Verizon CEO Ivan Seidenberg told an industry convention it would be a “mistake, pure and simple” for the FCC to impose a “burdensome regime” of regulation on the Internet. In contrast, the CEO of Qwest Communications, speaking one week after the FCC announcement, told Wall Street analysts that Qwest is not concerned with the issue and believes the rules which might be put in place will be adequate.
The Washington Post and OpenSecrets.org report that Verizon is among the most active lobbyists on these issues.
We believe independent members of the Board should give the Company’s position on this issue a second look to insure that the Company is adequately considering its social obligations as well as the risks and opportunities presented by this issue.
RESOLVED
Shareholders request a committee of independent directors publish a report, by August 2010 at reasonable cost and excluding confidential information, re-examining our Company’s policy position and discussing how the Company could address the challenges presented by the free and open Internet issue in the context of Verizon’s corporate social responsibility, its reputation, and the impact of the company’s policies on customers, communities, and society.
State Street – Political Contributions Report
RESOLVED
The shareholders of State Street (“Company”) hereby request that the Company provide a report, updated semi-annually, disclosing the Company’s:
1. Policies and procedures for political contributions and expenditures (both direct and indirect) made with corporate funds.
2. Monetary and non-monetary political contributions and expenditures not deductible under section 162 (e)(1)(B) of the Internal Revenue Code, including but not limited to contributions to or expenditures on behalf of political candidates, political parties, political committees and other political entities organized and operating under 26 USC Sec. 527 of the Internal Revenue Code and any portion of any dues or similar payments made to any tax exempt organization that is used for an expenditure or contribution if made directly by the corporation would not be deductible under section 162 (e)(1)(B) of the Internal Revenue Code. The report shall include the following:
a. An accounting through an itemized report that includes the identity of the recipient as well as the amount paid to each recipient of the Company’s funds that are used for political contributions or expenditures as described above;
b. Identification of the person or persons in the Company who participated in making the decisions to make the political contribution or expenditure; and
The report shall be presented to the board of directors’ audit committee or other relevant oversight committee and posted on the company’s website to reduce costs to shareholders.
SUPPORTING STATEMENT
Transparency and accountability in corporate spending on political activities is consistent with public policy, in the best interest of the company and its shareholders, and critical for compliance with recent federal ethics legislation. Political activities include direct and indirect political contributions to candidates, political parties or political organizations; independent expenditures; or electioneering communications on behalf of a federal, state or local candidate. Absent a system of accountability, company assets can be used for policy objectives that may be inimical to the long-term interests of and may pose risks to the company and its shareholders.
Relying on publicly available data does not provide a complete picture of the Company’s political expenditures. For example, payments to trade associations used for political activities are undisclosed and unknown. The proposal asks the Company to disclose all of its political contributions, including payments to trade associations and other tax exempt organizations.
The financial crisis highlights the need for this disclosure. Despite widespread calls for comprehensive regulatory reform to prevent another crisis, there has been surprisingly little action by Congress or the Administration. The role of the financial industry and trade associations in the failure to achieve meaningful reform was raised this fall when President Obama and administration officials called on the financial industry to stop lobbying against proposed financial reforms.
The Company’s Board and its shareholders need complete disclosure to be able to fully evaluate the political use of corporate assets. Thus, we urge your support for this critical governance reform.
Questar – Implement Sexual Orientation Non Discrimination Policy
WHEREAS
Questar does not explicitly prohibit discrimination based on sexual orientation and gender identity (or gender expression) in its written employment policy;
Over 87% of the Fortune 500 companies have adopted written nondiscrimination policies prohibiting discrimination on the basis of sexual orientation, as have more than 97% of Fortune 100 companies, according to the Human Rights Campaign. Nearly 70% of the Fortune 100 and over 40% of the Fortune 500 now prohibit discrimination based on gender identity or expression;
We believe that corporations that prohibit discrimination on the basis of sexual orientation and gender identity or expression have a competitive advantage in recruiting and retaining employees from the widest talent pool;
According to a June 2008 survey by Harris Interactive and Witeck-Combs, 65% of gay and lesbian workers in the United States reported facing some form of job discrimination related to sexual orientation. An earlier survey found that almost one out of every 10 gay or lesbian adults also reported that they had been fired or dismissed unfairly from a previous job, or pressured to quit a job, because of their sexual orientation;
Twenty-one states, the District of Columbia, and more than 180 cities and counties, have laws prohibiting employment discrimination based on sexual orientation; 12 states, the District of Columbia, and more than 104 cities and counties have laws prohibiting employment discrimination based on sexual orientation and gender identity or expression;..
Minneapolis, San Francisco, Seattle and Los Angeles have adopted legislation restricting business with companies that do not guarantee equal treatment for gay and lesbian employees; the City of Minneapolis’s nondiscrimination laws reference both sexual orientation and gender identity;
Our company has operations in and makes sales to institutions in states and cities that prohibit discrimination on the basis of sexual orientation;
A growing number of companies in the energy sector, such as BP and Chevron, explicitly prohibit sexual orientation in their written policies;
National public opinion polls consistently find more than three quarters of the American people support equal rights in the workplace for gay men, lesbians and bisexuals. In a Gallup poll conducted in May 2007, 89% of respondents favored equal opportunity in employment for gays and lesbians.
RESOLVED
The Shareholders request that Questar amend its written equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation and gender identity or expression and substantially implement the policy.
SUPPORTING STATEMENT
Employment discrimination on the basis of sexual orientation and gender identity diminishes employee morale and productivity. Because state and local laws are inconsistent with respect to employment discrimination, our company would benefit from a consistent, corporate-wide policy to enhance efforts to prevent discrimination, resolve complaints internally, access employees from the broadest talent pool, and ensure a respectful and supportive atmosphere for all employees. Questar will enhance its competitive edge by joining the growing ranks of companies guaranteeing equal opportunity for all employees.
PPG – Community Accountability Report
RESOLVED
Shareholders request the Board of Directors to report to shareholders, within six months, on how the corporation ensures that it responsibly discloses its environmental impacts in all of the communities where it operates. The report should be prepared at reasonable cost; omit proprietary information; and go above and beyond existing legal obligations and legal compliance systems. The report should contain the following:
1. how the corporation makes available reports regarding its emissions and environmental impacts on land, water, and soil—both within its permits and emergency emissions—to members of the communities where it operates;
2. how the corporation integrates community environmental accountability into its current code of conduct and business practices; and
3. the extent to which the corporation’s activities have negative health effects on individuals living in economically poor communities.
WHEREAS
PPG is a global supplier of coatings, chemicals, with over 140 facilities worldwide.
PPG is committed to “operating in a manner that is protective of people and the environment” and “is focused on stewardship and conservation, which not only helps protect the environment, but also gives PPG a competitive advantage in the marketplace.” (2008 Corporate Sustainability Report).
Yet, a recent analysis by Riskmetrics ranks PPG “worst in sector for Toxics Release Inventory emissions normalized by US sales.”
A report by noted scientist Wilma Subra links PPG’s Lake Charles facility’s emissions to documented medical conditions afflicting residents of neighboring Mossville, LA. (Chemical and Industrial Sources of the Chemicals Associated with the Medical Symptoms and Health Conditions of Mossville Residents, 5/25/09.) PPG is named as a source for over 60% of the chemicals identified and associated with medical ailments, the highest correlation rate of the five industrial plants analyzed in the study.
PPG was named as one of the top 100 U.S. corporate air polluters in 2005, according to researchers at the University of Massachusetts. (http://www.peri.umass.edu/ej/)
SUPPORTING STATEMENT
We believe that corporations have a moral responsibility to be accountable for their environmental impacts. No corporation can operate without the resources that local communities provide, but often these communities bear the brunt of corporate activities.
The proponents are also concerned about the effects of corporate activities on low-income areas and communities of color. Many communities bordering industrial facilities, including those owned by PPG, are majority African American. One study has found that industrial facilities operating in more heavily African-American counties “seem to pose greater risk of accident and injury than those in counties with fewer African-Americans.” (“Environmental Justice: Frequency and Severity of U.S. Chemical Industry Accidents and the Socio-economic Status of Surrounding Communities,” Journal of Epidemiology and Community Health, (2004)). We believe that all communities have a right to clean air, water, and soil.
Stakeholder engagement is featured prominently in PPG’s 2008 CR report, but no formal stakeholder engagement policy is in effect. The requested report would do much to assure shareholders and other stakeholders that the corporation takes seriously its ethical responsibilities to all of the communities that host its facilities.
Plum Creek Timber Co. – Say on Pay
RESOLVED
Shareholders of Plum Creek Timber Company request the board of directors to adopt a policy that provides shareholders the opportunity at each annual shareholder meeting to vote on an advisory resolution, proposed by management, to ratify the compensation of the named executive officers (“NEOs”) set forth in the proxy statement’s Summary Compensation Table (the “SCT”) and the accompanying narrative disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and Analysis). The proposal submitted to shareholders should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.
SUPPORTING STATEMENT
In our view, senior executive compensation at Plum Creek Timber has not always been structured in ways that best serve shareholders’ interests. For example, while shareholders were experiencing negative total shareholder return for 2008, CEO Rick Holley received more than $8 million in reported compensation, including more than $6 million in option awards.
We believe existing SEC rules and stock exchange listing standards do not provide shareholders with sufficient mechanisms for providing input to boards on senior executive compensation. In contrast, in the United Kingdom, public companies allow shareholders to cast a vote on the “directors’ remuneration report,” which discloses executive compensation. Such a vote isn’t binding, but gives shareholders a clear voice that could help shape senior executive compensation. A 2007 study of executive compensation in the U.K. before and after the adoption of the shareholder advisory vote there found that CEO cash and total compensation became more sensitive to negative operating performance after the vote’s adoption. (Sudhakar Balachandran et al., “Solving the Executive Compensation Problem through Shareholder Votes? Evidence from the U.K.” (Oct. 2007).)
Currently U.S. share exchange listing standards require shareholder approval of equity-based compensation plans; those plans, however, set general parameters and accord the compensation committee substantial discretion in making awards and establishing performance thresholds for a particular year. Shareholders do not have any mechanism for providing ongoing feedback on the application of those general standards to individual pay packages.
Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in setting performance targets for particular senior executives. Withholding votes from compensation committee members who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in which the committee has administered compensation plans and policies in the previous year.
Accordingly, we urge our board to allow shareholders to express their opinion about senior executive compensation by establishing an annual referendum process. The results of such a vote could provide our company with useful information about shareholders’ views on the company’s senior executive compensation, as reported each year, and would facilitate constructive dialogue between shareholders and the board.
