Release Date: Sep 29, 2003
NEW YORK, NY Responding to a vote from its shareholders, Union Pacific Corp. (NYSE: UNP) today announced that it will obtain shareholder approval for future "golden parachute" pay packages that give departing executives at least three times their salary and bonuses when they leave the company.
The move came in response to a vote at Union Pacific annual meeting in April, when 57% of the shareholders adopted a resolution urging this reform. The proposal was sponsored by Amalgamated Bank LongView Collective Investment Fund, which invests money on behalf of pension funds. The LongView Fund holds over 80,000 UNP shares.
The issue of excessive pay for senior executives has been a particular concern for shareholders in the past few years, with investors protesting that executive compensa-tion has spiraled out of control and is not effectively linked to how well a company per-forms.
"Golden parachutes" severance agreements, which can reward executives even if they leave the company in poor financial shape, have particularly drawn investor ire. Shareholders have begun demanding the right to approve outsized severance pack-ages.
The golden parachute proposal at Union Pacific is one of four similar resolutions that were sponsored by the LongView Fund and that won a majority of the shareholders' vote at 2003 annual meetings. Such shareholder resolutions are typically not binding on a company, but require action by a company's board of directors if they are to be im-plemented.
Shareholder resolutions urging curbs on executive compensation have increased in number in recent years, but 2002 marked the first time that majority votes were obtained for such proposals at two companies, Bank of America and Norfolk Southern. The Nor-folk Southern resolution, which was also sponsored by Amalgamated Bank LongView Fund, was implemented by the company's board in 2002.
The new Union Pacific policy will not affect existing contracts, although it will affect amendments to such contracts as well as new contracts affecting potentially 17 senior Union Pacific executives. At this time, only Chairman Richard K. Davidson and Presi-dent Ivor J. Evans have contracts guaranteeing them payment of three times their base pay plus bonuses if they leave the company under certain specified circumstances.
"We are pleased to see the Union Pacific board take this step to implement the view of its shareholders," said A. Melissa Moye, First Vice President, Trust and Investment Ser-vices of Amalgamated Bank.
Speaking of the growing support for similar resolutions, Moye added: "There is a lot of concern now that executive pay has run amok, and golden parachutes are just one element of the issue. These votes send a clear signal that shareholders are not willing to tolerate outlandish pay packages that can reward a handful of people at the very top while leaving investors in the lurch."
The Amalgamated Bank LongView Fund owns over 80,000 Union Pacific shares. The fund is managed by Amalgamated Bank, which provides trustee, investment advisory and custodial services to employee benefit plans. Assets under management total $7 billion.
See also: "Union Pacific Restricts Executive Severance"
Barry Bedlan, Associated Press
10/03/2003
