04/21/97 AN EMBARRASSMENT OF RICHES?

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AN EMBARRASSMENT OF RICHES?

When Union Pacific Corp. stockholders gather for the annual meeting in Salt Lake City on Apr. 18, they'll run a gauntlet of noisy Teamsters protesting high executive pay. Their target: Drew Lewis, who received $21.5 million last year as UP CEO and retired in January with a five-year, $3.75 million consulting contract that requires him to work one week a month. ''We're trying to raise the issue of CEO pay any way we can,'' says Bart Naylor, head of the union's corporate affairs unit. UP says Lewis' compensation was recognition for his role in the merger with Southern Pacific.
CEOs will see a lot more challenges to their pay packages this year, mostly from unions and religious groups. So far, 112 proxy resolutions on the issue have been filed, up from 63 in 1996, according to Investor Responsibility Research Center Inc. (IRRC), a proxy research firm in Washington. And on Apr. 10, the AFL-CIO was due to launch a site on the World Wide Web that tells workers and investors how to combat high CEO paychecks (www.ctsg.com/ceopay). While the protests haven't cut executive pay, the share of stockholders voting against new executive pay plans jumped to 19% last year, up from 3.5% in 1988, according to the IRRC. ''We have absolutely been voting 'no' more on CEO pay packages,'' says Peter Collins, a spokesman for Florida's $80 billion pension fund.
Although the public outcry that met last year's proxy season has died down, it hasn't gone away. Instead, it has gone grassroots. One way unions try to embarrass CEOs is by publicizing their pay. The United Farm Workers plans a campaign against Monsanto CEO Robert B. Shapiro, who earned $4.4 million in '96. Monsanto owns strawberry farms that pay pickers less than $10,000 a year.
Other groups are filing proxy resolutions to limit executive pay. In May, for example, AT&T stockholders will vote on whether the company should consider an executive pay cap at some level and a freeze during downsizings. The resolution is sponsored by the United States Trust Co. of Boston, whose investment arm runs socially responsible investment funds. The move was sparked by the $10 million in options CEO Robert E. Allen was granted in late 1995 as part of the restructuring that led to 40,000 job cuts. An AT&T spokeswoman says the board already considers these issues.
While management almost always prevails on such votes, many companies talk to the filing group. Some give ground. For example, the Teamsters, which has $60 billion in pension assets, filed a resolution last fall at RJR Nabisco Inc. to stop the company from repricing executive options when the stock falls. In 1995, RJR let execs swap options priced at up to $50 for new ones priced at $27 after its stock dropped to $27. After talks with the Teamsters, RJR agreed in February, 1997, to a new policy restricting repricing. The union withdrew its resolution. RJR says it wasn't planning to reprice more options anyway.
The AFL-CIO's Web site aims to spur attacks on high CEO pay. The target audience ranges from fund managers who invest $250 billion of union pension money to union leaders and members who own company stock, 401(k)s, or mutual funds. The Web site lets them look at a CEO's pay and chart it against average wages--or their own pay. It also tells investors how to dig up dirt on corporate directors' conflicts of interest with the CEO and how to file proxy resolutions. ''We want to arm people so they can battle to have their money represented differently,'' says William Patterson, director of the AFL-CIO's office of investments. If he succeeds, CEOs may be fighting off more pay complaints than ever.
By Aaron Bernstein in Washington

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