IBM Stockholder Proposal: Full Disclosure of Executive Officer Compensation
WHEREAS
compensation for IBM’s executive officers is listed in the annual report,
but their total compensation and related company liability is not readily
discernable by some professional investors or by the average shareholder;
and
WHEREAS this leaves shareholders with an inadequate and incomplete picture
of the company's future liabilities on behalf of those executive officers;
RESOLVED that IBM's Board of Directors establish a policy and practice to
provide full and transparent disclosure of all forms of compensation issued
and promised to Company executive officers. This should include, but not be
limited to, their salary, bonuses in all forms, loans, and their share of
deferred compensation schemes such as 401k, EDSP and the IBM Savings Plan,
stock options, life insurance, retirement benefits and any other perks which
constitute a current or future liability for shareholders of over $2000. This
disclosure shall be made in plain English and in dollar terms using industry
accepted accounting principles, including the total benefits paid in the prior
year, the total projected obligation, and the plan assets set aside to cover
that obligation, for each of the executive officers.
Statement of Support
The import of full executive compensation disclosure is exemplified in a Wall Street Journal Europe article dated 10/11/2002 and titled "Corporate Books Hide another Ticking Bomb: Deferred Compensation --- Tab for Executive ‘Top-Hat’ Plans Rises Yearly, Usually Isn’t Disclosed --- ‘a Tremendously Large Obligation’", which cites:
“Companies
are required to disclose only a piece of what they promise executives -- but
not their total annual contributions or even how many employees participate
in the plan.”
“It is beyond the experience, and certainly the patience, of most shareholders.”
“Still, incomplete information can stymie the efforts of shareholders, regulators
or anyone else trying to calculate an executive’s full compensation. It can
keep them from being able to understand deferred compensation’s impact on
a company's bottom line.”
“A footnote in International Business Machines Corp.'s latest proxy discloses
that last year Louis V. Gerstner Jr., now 60, the company's chairman, received
$300,000 in contributions to his 401(k) and the executive deferred-compensation
plan. A shareholder trying to tease out how that money was allocated would
have to know enough about tax law to realize that no more than $12,000 of
this payment could have gone into Mr. Gerstner's 401(k) account. And only
someone intimately familiar with SEC disclosure rules and the details of IBM's
top-hat plan would know that the figure leaves out interest credited to his
account.”
“An IBM spokeswoman confirms that the bulk of the $300,000 did indeed go into
Mr. Gerstner's deferred-compensation account. She says that the account's
returns mirror those of the investments in his regular 401(k) account, and
therefore need not be disclosed. The spokeswoman says thousands of its executives
participate in its deferred-compensation program, and that the average annual
deferral is $45,000.”