Contact: John Harrington – 707.252.6166
FOR IMMEDIATE RELEASE
April 5, 2005
Napa, California
How to Earn $12,000 an Hour
How can you earn $12,000 an hour? Simply by becoming the chief executive officer (CEO) of SBC Communications, Inc. (SBC).
Harrington Investments, Inc., a socially responsible investment company in California, has filed a shareholder proposal with the telecommunications giant, asking for an explanation of this fact. As shareholders, Harrington’s clients are fed up with the exorbitant compensation SBC has been paying its chief executive officer. SBC owns California-based PAC Bell and recently proposed buying AT&T for $16.8 billion.
“How long do stakeholders have to endure outlandish corporate CEO pay packages?” questioned John Harrington, President of Harrington Investments, Inc. “SBC’s financial, social and environmental performance, like its historical stock performance, does not justify such excess.” SBC shareholders will have the chance to vote on the proposal at the company’s annual meeting on April 29th.
Harrington’s proposal asks the company to review executive compensation and provide a report to shareholders by the summer of 2005. The report is to cover a number of issues, including the ratio between executive and employee pay, the consideration of social and environmental performance when formulating executive compensation, and the factoring in of employee downsizing when deciding what to pay executives. The report would also include an evaluation of whether executive compensation packages are excessive and an explanation of whether the Board Compensation Committee has considered a cap on future compensation packages.
Excessive CEO pay has been an issue with investors. In 2001, there were more than 50 shareholder proposals concerning executive compensation filed with U.S. companies. Shareholders, workers, and other stakeholders have been concerned that company boards may be more focused on their own compensation than the interests of the people who own the company or work for it. United for a Fair Economy, a non-profit organization dedicated to eliminating inequality, reported that in 2003 the ratio of CEO to worker pay in this country was more than 300-to-one, an increase over the 282-to-one ratio in 2002 and a substantial increase over the 42-to-one ratio in 1982.
The $12,000 figure cited in the headline is from an AFL-CIO website called Executive Paywatch Database (http://www.aflcio.org/corporateamerica/paywatch/). Containing pay information gleaned from company proxy statements, the database allows you to pick a company and then find out what the CEO made last year and how it compares to other average salaries. For example, according to the database, in 2003 Edward E. Whitacre, Chairman and CEO of SBC, earned $24,788,875 in total compensation, including stock option grants. This works out to $11,917 an hour, compared to $5.15 an hour for a minimum wage worker and $192 an hour for the President of the United States.
Forbes ranked SBC’s Mr. Whitacre number two on its list of top paid CEOs in the telecommunications industry for 2003. The only executive making more in this industry was Irwin M. Jacobs of Qualcomm. Although Mr. Jacobs was paid more, he received a higher efficiency rating than Mr. Whitacre, indicating a better company performance in relation to his pay. Forbes gave Whitacre a “D” efficiency grade for his performance compared to his pay, while Jacobs was given an “A.” Almost 27,000 jobs have been cut at SBC during the last 3 years. Since SBC shareholders have watched their stock value fall from $38.11 per share on October 31, 2001 to a closing price of $23.66 per share on April 1, 2005, it is certainly understandable why they are concerned.
SBC requested permission from the Securities and Exchange Commission (SEC) to keep the proposal off the ballot for the annual shareholder meeting, arguing that this issue was an ordinary business matter that did not concern shareholders. The SEC did not agree.
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