Shareholders push for say on exec pay

NEW YORK – Wall Street’s high-rolling CEOs live a lifestyle that would make Hollywood movie stars jealous – penthouse apartments, private jets, and paychecks tipping $60 million a year.

Corporate boards in recent years have rubber-stamped generous bonus packages for an elite set of executives, a reflection of a go-go stock market and soaring profits.

Now, as the credit crisis roils Wall Street and decimates stock prices, shareholders are demanding a voice.

Fund managers and individual investors alike are campaigning for a “say on pay” rule giving shareholders a vote on executive compensation at major corporations, especially America’s biggest banks.

Timothy Smith, a senior vice president at Boston-based Walden Asset Management, nearly pulled off a “say on pay” resolution at Goldman Sachs Group Inc.’s annual meeting Thursday. The proposal garnered 43 percent of the vote, despite strong recommendations for its rejection from chief executive Lloyd Blankfein and the investment bank’s board.

“To us it appears that Wall Street has a severe rash, to which its boards, made up of corporate members, respond ‘You scratch my back, and I will scratch yours,’ ” said Smith, whose firm owns 65,000 shares of Goldman Sachs.

Indeed, most boards these days are hand-picked by management and typically include executives from other companies. Goldman’s board has former top executives from Sara Lee Corp., Medtronic Inc., Colgate-Palmolive Co. and Allstate Corp.

Blankfein, who took home about $54 million in 2007, rejected the proposal, saying he didn’t want people who are “less sophisticated and have less understanding” of the financial industry making decisions on pay. Goldman’s top five executives were paid about $250 million total last year, including cash bonuses, stock awards and other compensation, according to the company’s proxy statement.

He likely hasn’t seen the last of Smith, and CEOs across every industry are facing similar challenges as companies hold their annual meetings throughout April and May.

Some 100 companies – from General Electric Corp. to Wal-Mart Stores Inc. – will be voting on “say on pay” proposals, but the odds might not be in shareholders’ favor. The average level of support for 51 say-on-pay-type resolutions in 2007 was 43 percent, according to RiskMetrics Group.

The idea has also become a populist hot button for politicians – especially for Democratic presidential candidates Barack Obama and Hillary Clinton.

Obama demanded during a stop in Indianapolis on Friday that company shareholders have a say in executive pay, and he wants Congress to pass legislation that would require it.

“This isn’t just about expressing outrage,” Obama said. “It’s about changing a system where bad behavior is rewarded so that we can hold CEOs accountable, and make sure they’re acting in a way that’s good for their company, good for our economy, and good for America, not just good for themselves.”