Shareholders Score at WaMu

Posted by: Jena McGregor on April 15, 2008

At the Washington Mutual annual meeting today, the score on three key shareholder issues was activists three, bank zero. The nation’s largest thrift, which reported a $1.1 billion loss for the first quarter and has been among the hardest hit by the subprime mortgage crisis, has come under heavy fire in recent months. And under even more at today’s shareholder meeting: “It’s no longer a WaMu board,” said Scott Adams, a representative from the American Federation of State, County and Municipal Employees (AFSCME), who was interrupted by applause. “It’s more like a Wa-Me board, short for what’s in it for me. The mutual is gone.”

Shareholders managed to win big on three fronts. One of two shareholder proposals on the proxy ballot, a separation of the Chairman and CEO posts currently both held by Kerry Killinger, won 51% of the vote, a rare majority win for shareholders. Earlier today, director and finance committee chair Mary Pugh, who was responsible for monitoring the bank’s risk management, resigned under pressure. Several shareholder groups and proxy watchers, including Proxy Governance, ISS and Change to Win (CtW) had all called for shareholders to withhold votes for her reelection.

And perhaps most notable: WaMu reversed a much-criticized decision to leave out the company’s mortgage-related losses when calculating profits that determine executive bonuses for the year ahead. The move effectively shielded executives from further fallout in the housing crisis, and was widely scoffed at by pay consultants. Shareholders were incensed. “It doesn’t make any sense to exclude some of the most significant lines of business they’re in,” says Richard Clayton, research director at CtW. As recently as a few weeks ago, the company was defending the move. “WaMu’s executive compensation program is designed to align compensation with the company’s current and long-term business strategy and goals,” wrote one spokesperson in an email on March 25. “As a result, management is held accountable for total company performance.”

Is today’s WaMu meeting a tipping point for shareholder success? It’s too early to tell, and WaMu’s case is extreme. But the bank’s succumbing to executive pay criticism, the departure of Mary Pugh, and the high vote on the CEO-Chairman role is one more indication of a new era of shareholders’ weight in the often arcane world of corporate governance. Just don’t expect them to rest on these wins. CtW is already calling on the company to release full election results and believes preliminary results may point to other directors failing to win a majority. “It’s disappointing that it took the concerted action of shareholders to correct the failure of the compensation committee,” said CtW executive director William Patterson in a statement. “To avoid a repeat failure by the compensation committee, we have called on Washington Mutual’s board to immediately request the resignation of [compensation] Committee Chairman James Stever.”

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Reader Comments

Midwest

April 15, 2008 10:01 PM

Shareholders banding together to effectively fight outrageous compensation from thieving CEOs and ineffective boards??

Not on your life. Corporate bylaws often hide rules that protect the board and executives from angry shareholders and hold them harmless from proxy votes that don't go their way.

The hubris that WaMu's board showed when it tried to hold their executives above the subprime mess only shows how far these liars and criminals are willing to go. Scratching one another's backs is the least of our worries. These well heeled thieves are finally showing their true colors now that things have slowed down.

They were there to accept unbelievable pay packages with shrill claims of "Look what I did for the shareholders" but when the bright light of reckoning came down on them, they did their very best to sidestep their horrible management while still trying to reap tens of millions in bonus checks.

I imagine they were thinking that we should "...eat cake" and shut our mouths.

Congratulations to the WaMu shareholders. Now we need them to take their fire to all the other corporations whose executives view the company they're employed by as their own personal bank account.

Tsais

April 16, 2008 06:24 AM

about time owners started calling the shots...

what took you so long?

only a major crisis could wake enough of you?

MoMo

April 16, 2008 12:18 PM

All I want to know is when the serious layoffs of WaMu employees are going to start? As a shareholder I've been subsidizing some of the most lazy and incompetent people working for that bank. I know employee who does nothing all day but get paid 100k, WaMu has some of the most outrages above market compensation.....

Sundar Coimbatore

April 16, 2008 01:19 PM

I have no problem with well-performing managements getting bonuses, but poorly performing managements should not have a 'heads I win, tails you lose' attitude. They should take it on the chin when going in loss. Otherwise, the top guy responsible for the mess makes unearned bonuses, while the lower-level employees are let go.

If the top-level guys are let go after a massive loss, they should be made to return the bonuses they got when the organization was doing well.

davidm4640

April 16, 2008 02:43 PM

WaMu's leadership made a mess of the Home Savings and Loan aquisition, and others over the years. Management ignored the shareholders for decades, so why is everyone so shocked when management tried to ignore the shareholders again? WaMu is a poorly run operation and only now, thanks to the collapse of the mortgage market has anyone bothered to take any notice.

Killinger and his hand picked board have gotten rich off the backs of shareholders and customers. Though, it is time for shareholders to understand that the idea of "ownership" through owning shares in a company, only applies in much smaller enterprises. In this case, management has, and will continue, to operate with impunity. When your percentage of ownership can be diluted without your permission, the dividend cut without even a prior notification and request for approval, then in reality, you own nothing but the paper and ink.

Owning anything means involvement. Today's shareholders are more attuned to being speculators than to owners.

mg

April 16, 2008 06:14 PM

I've been to a lot of major corporation shareholder meetings, and they're all the same. A well orchestrated performance designed to make big impressions with mediocre performance, while "glossing over" the real issues. Didn't happen here, and I'm proud of every WaMu shareholder that voted their conscience. It's about time.

z

April 16, 2008 06:59 PM

WaMu CEO and its board flunked miserably. I understand that people may make a bad bet, but I can't trust anyone in the money business who trades greed over integrity. It's shame that all senior management and board members, minus Pugh, are still leading this company.

I honestly don't see how WaMu can recover.

PacificGatePost

April 16, 2008 09:35 PM


Isn't it time the system went in for some much needed repair?

Due diligence and oversight long ago slid out the window. No one was watching.

Time to do something about it.

Here's a huge one they all missed.... The dramatic change that swept through all of North America's boardrooms over the past 30 years. It is one of the underlying causes of the headache the economy is now feeling, but more importantly, it has resulted in the general feeling of "disconnect" by most Americans.

"WE THE SHAREHOLDERS OF YOUR COMPANIES......


http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html



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How can you manage smarter? BusinessWeek writers Nanette Byrnes, Patricia O’Connell, Emily Thornton, Matthew Boyle, Michelle Conlin and Diane Brady synthesize insights from the brightest business thinkers, critique the latest management trends, and comment on leaders in the news.

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