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Comptroller William C. Thompson, Jr., on behalf of the New York City Pension Funds, has filed shareholder proposal calling for Mercury Interactive Corporation to review the performance-based compensation made to its senior executives .

The proposal was submitted by the New York City Employees' Retirement System (NYCERS), New York City Police Department Pension Fund, New York City Fire Department Pension Fund, New York City Teachers' Retirement System (TRS) and New York City Board of Education Retirement System (BERS).

A restatement announced by Mercury Interactive prompted the proposal. A financial restatement takes place when a company, either voluntarily or when prompted by auditors or regulators, revises public information that was previously recorded, announced or filed.

“The extent of Mercury Interactive’s planned restatement suggests that bonuses and equity awards to senior executives would have been lower had those payouts been calculated on the basis of actual results,” Thompson said. “Performance-based payments that rest on results that need to be restated downwards constitute undeserved compensation.”

In August 2005, Mercury Interactive Corporation of Mountain View, CA, announced it would restate results from 2002 through the first quarter of 2005. Three months later, a special committee of its Board of Directors concluded that certain stock option awards had been backdated and showed different dates than had been originally reported, and the company’s Chief Executive Officer, Chief Financial Officer and General Counsel resigned.

The options had been extremely lucrative, with the former CEO earning $5.5 million since 1995 and an additional $73.6 million after the CEO sold more than one million shares. The former CFO and General Counsel each profited by more than $1 million after exercising options and selling their shares.

On January 3, 2006, the NASDAQ delisted shares of Mercury Interactive for failing to meet its deadline to restate its results.

The funds collectively own 182,445 shares of Mercury Interactive with a market value of $5,030,008.

Besides Thompson, the Pension Funds trustees are:

Fire Department Pension Fund: 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.

Police Pension Fund: Mayor Michael Bloomberg; New York City Finance Commissioner Martha E. 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: New York City Finance Commissioner Martha E. Stark (Chair); New York City Public Advocate Betsy Gotbaum; Borough Presidents Scott Stringer (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: New York City Finance Commissioner Martha E. 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: mayoral appointees Schools Chancellor Joel Klein, Alan Aviles, Philip Berry, David Chang, Tino Hernandez, Augusta Souza Kappner, Richard Menschel and Marita Regan; Borough President appointees Jesse Mojica (Bronx), Martine G. Guerrier (Brooklyn), Vivian Farmery (Manhattan), Michael Flowers (Queens), and Joan Correale (Staten Island); and employee members Thomas J. Malanga of the International Union of Operating Engineers, Local 891, and  Milagros Rodriguez of District Council 37, Local 372.

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