Comptroller and Funds call for companies to establish independent compensation, audit committees

View Independent Compensation Committee Resolution
View Long-Term Incentive Resolution
Independent Audit Committee Resolution
Auditor Ratification Resolution

New York City Comptroller William C. Thompson, Jr., on behalf of New York City 's five pension systems, has filed shareholder resolutions with six companies asking them to adopt a number of corporate governance reforms, including establishing independent compensation and audit committees.

The five funds are the New York City Employees' Retirement System (NYCERS), the Teachers' Retirement System (TRS), the Police Pension Fund, the Fire Department Pension Fund and the Board of Education Retirement System (BERS).

"Corporate scandals in recent years have resulted in the loss of billions of dollars to investors and the erosion of public trust in the stock markets and in the boards of major companies," Thompson stated. "The enforcement of ensuing legislative and regulatory reforms and corporate governance initiatives are beginning to restore investor confidence, and market performance is improving. But further corporate governance reforms are needed to hold the boards of public companies accountable to their shareholders."

T he funds submitted resolutions requesting that companies link compensation for executives to performance and ensure that Boards of Directors present the appointment of companies' independent auditors for shareholder vote.

The corporate governance resolutions are:

•  Independent Compensation Committee: Resolutions were submitted to two companies asking for the establishment of a Compensation Committee comprised solely of independent directors that do not have a professional, familial or financial connection to the corporation, its chairman or its executive officers. The resolution proposes a higher standard for director independence than that of the New York Stock Exchange and NASDAQ.

Resolutions were submitted to PMC-Sierra of Santo Clara , CA , and Clear Channel Communications, Inc. of San Antonio , TX . The five funds have 661,509 shares valued at $7,051,686 in PMC-Sierra, and 2,019,772 shares valued at $69,419,563 in Clear Channel.

Clear Channel received No Action relief from the Securities and Exchange Commission (SEC), indicating that no civil or criminal action will be taken against the corporation for failure to include the shareholder proposal in its proxy materials. The Comptroller's Office made a request for reconsideration of the No Action determination to the SEC on February 15, 2005 .

•  Long-Term Incentive : A resolution was submitted to one company for the adoption of a policy requiring that equity compensation granted to senior executives is performance-based and linked to the long-term growth of the company.

The resolution was presented to Abercrombie & Fitch of Columbus , OH , due to the lack of adequate oversight by the Compensation Committee of its Board of Directors over the pay package for CEO Michael Jeffries. Jeffries averaged $22.9 million per annum over the past three years with a significant portion of compensation made in stock awards. According to the resolution, Jeffries collected considerably more total annual pay, in comparison to his better performing peers.

The five funds have 533,877 shares valued at $29,620,051 in Abercrombie & Fitch. The company has filed a No Action request with the SEC, the Comptroller's Office will file a response.

•  Independent Audit Committee: A resolution was submitted to one company that proposes the Board of Directors establish a policy that requires the Audit Committee be comprised solely of independent directors. The resolution is similar to the Independent Compensation Committee proposal in that it advocates a higher standard for director independence than that of the New York Stock Exchange and NASDAQ.

The resolution was submitted to EMC Corporation of Hopkinton , MA . The five funds have 8,613,262 shares valued at $113,781,191 in EMC.

•  Auditor Ratification: Resolutions were submitted to two companies seeking Boards of Directors to present the appointment of independent auditors for shareholder ratification or rejection at annual meetings.

Resolutions were proposed to Global Industries of Carlyss, LA, and the WebMD Corporation of Elmwood Park , NJ . The five funds have 269,024 shares valued at $2,203,307 in Global Industries, and 869,725 shares valued at $6,714,277 in WebMD.

Trustees of the five pension systems are:

New York City Fire Department Pension Fund: Comptroller Thompson, Mayor Michael Bloomberg; New York City Fire Commissioner Nicholas Scoppetta (Chair); New York City Finance Commissioner Martha E. Stark; Stephen Cassidy, President, James Slevin, Vice President, Robert Straub, Treasurer, and John Kelly, Brooklyn Representative and Chair, Uniformed Firefighters Association of Greater New York; Peter Gorman, President and Captains' Rep., Nicholas J. Visconti, Chiefs' Rep., and Stephen J. Carbone, Lieutenants' Rep., Uniformed Fire Officers Association; and, Joseph Gagliardi, Marine Engineers Association.

New York City Police Pension Fund: Comptroller Thompson; Mayor Bloomberg; Commissioner Stark; New York City Police Commissioner Raymond Kelly (Chair); Patrick Lynch, Patrolmen's Benevolent Association; Michael Palladino, Detectives Endowment Association; Edwin Mullins, Sergeants Benevolent Association; Anthony Garvey, Lieutenants Benevolent Association; and, John Driscoll, Captains Endowment Association.

NYCERS: Comptroller Thompson; Commissioner Stark (Chair); New York City Public Advocate Betsy Gotbaum; Borough Presidents C. Virginia Fields (Manhattan), Helen Marshall (Queens), Marty Markowitz (Brooklyn), Adolfo Carrion (Bronx), and James Molinaro (Staten Island); Lillian Roberts, Executive Director, District Council 37, AFSCME; Roger Toussaint , President Transport Workers Union Local 100; and, Carroll (Carl) Haynes, President, International Brotherhood of Teamsters, Local 237.

TRS: Comptroller Thompson; Commissioner Stark (Chair); Deputy Chancellor Kathleen Grimm, New York City Department of Education; and, Sandra March, Melvyn Aaronson and Mona Romain, all of the United Federation of Teachers.

BERS: Schools Chancellor Joel Klein, Alan Aviles, Phillip Berry, David Chang, Tino Hernandez, Souza Kappner, Richard Menschel and Marita Regan; Borough President appointees Jesse Mojica (Bronx), Martine Guerrier (Brooklyn), Jacquelyn Kamin (Manhattan), Michael Flowers (Queens) and Joan Correale (Staten Island); and employee members Thomas J. Malanga, International Union of Operating Engineers, Local 891, and Milagros Rodriguez of District Council 37, Local 372.

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