A Publication of NorthStar Asset Management, Inc.

Reigning in Excessive CEO Pay at ExxonMobil

At the end 2005, Chief Executive Lee Raymond retired from ExxonMobil. Shareholders should breathe a collective sigh of relief. The $80 million dollars of compensation and $65 million in options Raymond received in 2004 will no longer be on the balance sheet. Even so, ExxonMobil’s long-standing practice of paying out exorbitant compensations to its CEO, especially while gas prices rise for the rest of us, deserves critical attention. For these reasons, NorthStar Asset Management, Inc. filed a shareholder resolution asking for a company investigation that might provide a clear explanation of the former CEO Raymond’s pay package.

“We were surprised a company like ExxonMobil, who has always prided itself on the bottom line numbers, would ever allow CEO compensation to go so high,” said Julie Goodridge, President of NorthStar Asset Management, Inc.

During 2004, ExxonMobil paid Mr. Raymond the equivalent of $38,000 an hour. One person earning the federal minimum wage must work more than three years to earn what Mr. Raymond pocketed in 60 minutes.

In 2004, the median pay for the CEOs of the nation’s 350 largest companies was $5.9 million according to The Wall Street Journal (4/11/2005). Last year, Chevron-Texaco paid CEO David O’Reilly $8 million, one-tenth of Raymond’s salary. Conoco paid its CEO, James Mulva, $16 million, one-fifth of Raymond’s salary. “Does this level of compensation add to shareholder value or does it end up putting the company at a higher risk?” Goodridge questioned.

Raymond’s imminent retirement, noted Goodridge, provides an excellent opportunity to re-examine ExxonMobil’s compensation policy, especially, in light of the Securities and Exchange Commission’s new campaign for compensation transparency. The SEC is considering a policy that would require public companies to reveal, in one simple number, the totality of top executives’ compensation packages, including perks not currently disclosed.

Additionally, two bills filed recently, one by Barney Frank (D-MA) and another by Martin Sabo (D-MN) call for more disclosure. Frank’s bill, the Protection Against Executive Compensation Abuse Act (HR 4291), requires corporate boards to win shareholder approval for annual executive compensation plans. Sabo’s Income Equity Act of 2005 would deny corporations tax breaks on any executive pay that runs over 25 times the pay of a company’s lowest-paid worker.

Concerned activists have called a boycott of ExxonMobil which stands accused of numerous shenanigans including:

• its active support of drilling in the Arctic National Wildlife Refuge.
• its continued blocking of meaningful action to cut global warming pollution and its funding of junk science to hide the real facts about global warming;
• its conscious decision to forgo investment in clean energy solutions – despite its record profits at a time of rising gasoline prices; and,
• its failure to pay all of the punitive damages awarded to fishermen and others injured by the 1989 Exxon Valdez oil spill.

“Lately it seems ExxonMobil spends a great deal of leadership time and energy defending costly and irresponsible company policies, rather than carefully examining the bottom line. As shareholders, we’d like to see the company take the initiative to set an appropriate level of compensation instead of constantly reacting to lawsuits and legislation,” Goodridge noted.

What is News Worthy?

The day after we sent out scores of press releases announcing our ExxonMobil shareholder resolution, over 50 newspapers, television news programs and radio stations from across the country carried the story of ExxonMobil’s excessive compensation. But, not The Wall Street Journal.

Instead, on the front page of the venerable, financial daily, appeared an article on “revirgination” or how women are “reclaiming” their virginity by surgically re-attaching their hymens. Yes, on the front page of The Wall Street Journal!

We funneled our outrage into the following letter to the editor:

Dear Editor,

Yesterday my company, NorthStar Asset Management, Inc. sent a press release to The Wall Street Journal about our shareholder resolution at ExxonMobil concerning excessive executive compensation. Nothing was reported. This morning, on the front page there is an article about “revirgination.”

ExxonMobil’s CEO, Lee Raymond, pockets the equivalent of $38,000 an hour. Women get their hymens rebuilt. Which is front-page news? Will the next article be about scrotum lifts instead of Barney Frank’s legislation on the Protection Against Executive Compensation Abuse Act (HR4291)?

Perhaps if the excessive executive compensation being paid out to CEOs could be linked to funding important surgery such as the rebuilding of wives’ hymens that would make the front page. We’ll work on tying that into our next resolution so we might get a passing look from your paper.

Sincerely,
Julie N.W. Goodridge

Perhaps, not surprisingly, our letter went unpublished by the Journal. (You can find the beginning of the “revirgination” article here.)

Did Somebody Spike the Herb Tea?

By Sam Pizzigati

One of the world’s largest natural foods companies has agreed to document and disclose the exact pay gap between its top executives and lowest-paid workers – and evaluate whether that pay gap should be narrowed.

This surprising decision by the New York-based Hain Celestial, says shareholder activist Margaret Covert, may represent a Corporate America first. No other major American company appears ever to have “agreed to study, tabulate, and release” detailed pay gap data.

Hain Celestial distributes Celestial Seasonings tea and a host of other supermarket staples. The company last year registered $680 million in revenues, a modest sum by big-time corporate standards, but still compensated its CEO, Irwin Simon, at big-time levels.

In 2004, Simon took home over $14.3 million, a package nearly three times the typical CEO pay at the 350 billion-dollar companies tracked by The Wall Street Journal.

Simon’s staggering pay package didn’t sit particularly well with corporate watchdogs at NorthStar Asset Management, a Boston-based company specializing in socially responsible investing.

“Wealth disparity,” notes Margaret Covert, NorthStar’s shareholder activism coordinator, “is one of the issues many of our clients struggle with.”

NorthStar filed a shareholders resolution that asked Hain Celestial to compare total compensation for the company’s top execs and lowest-paid U.S. workers, analyze “changes” in the top-bottom pay gap over the last ten years, evaluate the “rationale” for the gap, and report – by next July – whether the company’s executive pay should be adjusted “to more reasonable and justifiable levels.”

NorthStar first started filing excessive executive pay resolutions along this line in 1998, often working closely with Responsible Wealth, the United for a Fair Economy project that organizes affluent people worried about growing economic inequality in the United States.

This Hain Celestial filing would prove unique. The company, after talking with NorthStar, actually agreed to the resolution.

“We are pleased by the concrete actions Hain Celestial is taking to respond thoughtfully to our resolution,” says NorthStar’s Covert. “The consequences of excessive executive compensation are all too often damaging to the company’s employees, its shareholders, and its share price.”

Sam Pizzigati edits Too Much: Commentary on Capping Excessive Income and Wealth

Spotlight: Political Donations

This week in politics we find: Congressmen distancing themselves from once friendly lobbyists; Jack Abramoff’s relationship with the indicted former Republican leader Tom Delay continues to be scrutinized; and former CEO, Ken Lay, of now extinct Enron on trial for obliterating shareholders’ value as well as its employees’ futures. All of this because companies are using shareholder resources for political gains.

And yet, under current government rules, companies are not required to disclose their political spending, including the unlimited “soft money” donations and dues given to trade associations (read: lobbyists). Secrecy and the absence of accountability gives executives substantial freedom to dole out corporate money for political purposes without internal or external controls.

Given the plea agreement of lobbyist Jack Abramoff, the charges of money laundering lodged against Rep. Tom Delay, and the demise of companies like Enron, you’d think that executives would be jumping at the chance to cast some sunlight on their political contributions. But most companies refuse to reveal their donations and end up potentially damaging their reputations for supporting groups or candidates with positions that may be at odds with the company’s own policies.

In fact, only a handful of companies actually divulge the truth of their political activities. Staples, Inc. is now one of those companies thanks to a shareholder proposal submitted by NorthStar. Staples plans to adopt an open and transparent policy for the company’s political donations. The company will post, on its website, a yearly list of political contributions it has made to candidates as well as contributions to political parties and “527” political organizations.

We applaud the steps that Staples has taken to be more transparent and accountable to its shareholders. After all, the purpose of political spending by any company should be to protect and enhance shareholder value and that spending should reflect the company’s stakeholder interests.

Google’s China Quandary

Google is under fire from civil rights activists for collaborating with the Chinese government in censoring the content of Google searches on the Chinese version of the popular search engine.

We believe that Google ought to be forthright with its shareholders by disclosing the actual policies it is following that were set forth by the repressive Chinese government.

Google should disclose the laws, regulations, and procedures that have required specific words and URL’s to be blocked. It should prevent Google.com from being censored like the Chinese variant, Google.cn. It should resist government requests for search data. And it should set clear procedures for its China-based staff.

Multinational companies should not play the role of lapdog of repressive regimes. Reportedly, most information technology companies operating in China don’t even defend the rights and interests of their users to the full extent of Chinese law. We expect more from a company whose mantra is “Don’t be evil.”

Written by Margaret J. Covert & Sara Whitman.