Investor activist gets his say on lowering executive pay

MORRISTOWN, N.J. – Some of Robert Morse’s ideas are small: Paint a baseball so it’s easier to read a curve. Make a four-colored deck of cards so his wife doesn’t confuse the spades and clubs.

Some are bigger: Cap the pay of American corporate executives at $500,000 a year.

The 92-year-old inventor, poet and shareholder activist considers such a level of compensation “far above that needed to enjoy an elegant lifestyle,” according to his proposal at Merck’s annual meeting last month.

“How many planes can you fly on? How many pairs of shoes can you wear?” asks the retired jeweler, who keeps a model of a gadfly in his home office. There he tracks and trades stocks online, managing his retirement money while maintaining enough stock to submit shareholder proposals at dozens of corporations.

Part nest egg and part soapbox, those shares have given Morse the right to put his proposal before investors at Merck & Co., Ford Motor Co., Coca-Cola Co., Exxon Mobil Corp. and others over the past decade. He hasn’t won one yet – but he’s not giving up.

A half-million dollar pay cap makes sense, he says, particularly compared to the presidential salary.

“He only gets $400,000 and he has to control the whole world,” Morse says. “A CEO just worries about one company.”

Morse’s plan won just 4 percent of shareholder votes at Merck – a standard reception for his proposals – but a network of like-minded investors is having more success with a gentler request: Give shareholders an advisory vote on executive pay.

Analysts say the economic slowdown and new standards of disclosure for executive compensation have contributed to the sudden popularity of the “say-on-pay” advisory vote since 2006, when only half a dozen companies considered the measure.

Paul Hodgson of The Corporate Library, an independent governance research firm, said the state of the economy has made many investors anxious about the escalating pay for top executives. Meanwhile, new regulations require publicly traded companies to more fully disclose the value of stock options and benefits in compensation packages, giving investors a clearer picture of just how much CEOs are getting.

“Five years ago the markets were doing great and now they’re not. But CEO pay has kept going up,” Hodgson said.

Last Monday, insurance company Aflac Inc. put its top executives’ compensation to an advisory vote – a first for a U.S. company, according to Aflac spokeswoman Laura Kane. By a 93 percent vote, investors approved CEO Dan Amos’s $14.8 million compensation in 2007, a year when the company’s shares reached all-time highs.

Other boards, though, have overwhelmingly opposed the say-on-pay proposals.Verizon Communications Inc., Blockbuster Inc. and Par Pharmaceutical Co. will give investors a nonbinding vote on executive pay beginning next year, after a majority of their shareholders supported the idea in 2007.

CEOs now make more than 400 times the salary of the average worker, compared with 40 times as much in 1980, according to The Institute for Policy Studies, a liberal research group.

Morse says corporations need to be reminded of how little it takes to live comfortably – but he’s realistic about what one man can do.

“I’m going to keep going,” he said. “Things will change but not in the next year or two. The public doesn’t respond fast enough.”