According to RiskMetrics, the Laborers’ International Union of North America and the International Brotherhood of Teamsters don’t think Treasury’s bailout program does enough to curb executive compensation.
The unions want a number of reforms, including:
- Incentive compensation not to exceed one times annual salary;
- Stock option awards tied to increased company performance relative to a peer group;
- Stock award holding requirements for the full term of an executive’s employment;
- No accelerated vesting; and
- Limits on severance payments.
The labor funds have submitted proxy statement proposals to JPMorgan Chase, KeyCorp, Bank of America, American Express, and SunTrust Banks, and plan to submit proposals to more than 45 other firms planning to participate in the Troubled Asset Relief Program (TARP).
Participation in the TARP requires some limits on executive compensation so companies may be able to argue exclusion of the labor union proposals from the proxy on the grounds they have “substantially implemented” the requests.
The debate continues as to whether executive compensation is a product of free market labor costs or the market is flawed and needs executive compensation regulation.