April 2003

California Supreme Court Ruled CalPERS in Violation

The California Supreme Court has ruled that CalPERS violated several state laws. The decision also extends to CalSTRS, the nation’s 3rd largest pension fund.

According to the press, the justices let stand a January appeals court ruling in a lawsuit brought by former state Controller Kathleen Connell who had challenged the authority of the pension fund’s 13-member board to boost salaries for about 30 investment managers.

“This is a significant setback for Calpers, its members and all public pension systems in California,” said CalPERS spokesman Brad Pacheco. “It cuts through the hearts of our ability to attract and retain investment staff of the caliber needed to generate investment returns and to minimize costs.” However, for the near term CalPERS will circumvent the ruling, allowing the investment managers to keep their jobs and current salaries using a paper shuffle. Pacheco said Calpers would put the managers in temporary positions for the remainder of the year. “If we didn’t have in-house managers we would have to rely on outside managers who would be more expensive and the cost would be borne by taxpayers,” Pacheco said.

The pay raise for money managers was seen by some as a mere cover story at the time the Board voted to ignore state law and raise their own pay. The press bought their press office spin and continues to do so. The Board’s more self-serving action barely got a mention. At the time they awarded themselves a pay raise, part of the logic was that not raising their pay would be a violation of their fiduciary duty because CalPERS would be unable to attract qualified candidates for the Board.

Ironically, that logic came shortly after the Board dropped a controversial rulemaking, which would have restricted ballot statements of Board candidates to “a recitation of the candidate’s personal background and qualifications” — and nothing more. Incumbent Board members voted to prohibit “candidates’ opinion or positions on issues of general concern to the system’s membership.” A Sacramento Bee editorial said “the vote by CalPERs incumbents muzzles challengers in ways that risk creation of a permanent board: unaccountable, untouchable and isolated from the people who elect it.”

Right after CalPERS voted to amend regulations to raise their own pay, in volition of limits specified by the California Government Code, I filed for a determination on the legality of the regulations with the Office of Administrative Law. This was the poor man’s route to a legal judgment that has been recently terminated because of California’s budget crisis.

Within a few weeks of my filing, former state Controller Kathleen Connell filed a lawsuit charging that CalPERS had violated California’s statutes by raising the daily payments to board members for attending meetings. The lawsuit also charged CalPERS with awarding pay increases that exceeded state limits for civil service employees and that additional laws were violated.

Interestingly, the current CEO of CalPERS, Fred R. Buenrostro, Jr., was Connell’s CalPERS point person when she brought (carried to the California Supreme Court by Westly) the lawsuit was filed and was active in urging the Board to see the error of their ways. Now he finds himself in the difficult position of attempting to obey the Supreme Court’s judgment, while, at the same time, pleasing the CalPERS Board. Fortunately, there has been turnover on the Board, so maybe it is not an impossible task. I think the majority of the current Board agrees that CalPERS must, at minimum, strictly adhere to the law. (Ruling against CalPERS, Sacramento Bee, 4/30/03 and Calif. court rules Calpers wage increases illegal , Reuters, 4/29) CalPERS is expected to soon sponsor legislation for the salary increases.

Angelides Targets Executive Pay Abuses

At upcoming board meetings of California public pension funds CalPERS and CalSTRS, California Treasurer Phil Angelides will propose guidelines that would apply to the 1,000 largest companies in which the funds invest, barring investment by the funds in companies that reserve stock-based compensation for senior executives.

Angelides said his goal was to use the pension systems to spur broad-based compensation plans that go beyond top executive officers. “Broad-based equity compensation plans create enduring value for the corporations that adopt them,” said Angelides.

Under his plan, CalPERS and CalSTRS would only invest in companies that grant less than 5 percent of their total equity compensation to the top five executives and give less than 25 percent of shares awarded as pay to executives and directors of the company. The guidelines would also call on companies to provide a vesting schedule for stock options of at least four years.

Angelides didn’t name any of the companies that would be impacted. However, a 2002 analysis by executive compensation consultant Frederic W. Cook & Co., showed that Target, Tenet Healthcare, and Qwest Communications awarded around 30 percent of stock options to the top five executives and about 20 percent to their CEOs.

While I agree that broad-base plans help firms generate more wealth and both funds will benefit if companies they invest in follow Angelides’ guidelines, divestment may not be the answer, unless it is part of an overall plan to trim firms with the worst corporate governance practices from portfolios in order to give CalPERS and CalSTRS more clout with those remaining. Divestment will drive the price of the stock down, just as the funds are selling. Additionally, it and leave the funds powerless to get the companies to change once they’ve divested. It’s like moving your residence if you disagree with the mayor. Moving costs money. A better strategy might be to team with others who are dissatisfied and elect board members at these corporations that will either reign in the CEOs or replace them.

On April 14, 2003, the Securities and Exchange Commission (SEC) announced it would consider possible changes to proxy regulations “to improve corporate democracy.” Staff will examine “procedures for the election of corporate directors” and issue a report by July 15th, after consulting with “pension funds, shareholder advocacy groups, business and legal communities.” New rules could be in place by next year’s proxy season. CalPERS requested the SEC to take this action. Instead of threatening to sell, CalPERS and CalSTRS should threaten to elect board members that will represent the interests of shareholders. (California treasurer takes aim at executive pay, 4/17/2003, Reuters)

Good Governance Improves Performance

A study by GovernanceMetrics International, an independent corporate governance ratings agency, confirms the correlation between corporate performance and an attention to governance.

Gavin Anderson, CEO of GovernanceMetrics, said his firm studied one, three and five-year returns of companies in the Standard & Poor’s 500-stock index and found that stocks of companies at the top of the firm’s ranking outperformed the index in a meaningful way. Those ranked lowest significantly underperformed the index.

In the S&P 500, the average decline of a stock for the three years ended March 20, 2003, was 2.3%. The index itself fell much farther because it is weighted by capitalization, and large companies that declined significantly had a bigger impact. But the five companies earning the firm’s highest score rose 23% on average. The top 15 companies averaged total returns of 3.4%.

To identify good governance, GovernanceMetrics takes roughly 600 measures. These include labor practices, environmental activities, workplace safety approach and litigation history. They also look for anti-investor practices, like instituting poison pill provisions to prevent takeovers and keep management entrenched.

TIAA-CREF Holds Back on Democracy Issue

ISS Friday Report for April 25th carries an interview with Peter Clapman, chief counsel of corporate governance at Teachers Insurance and Annuity Association – College Retirement Equities Fund (TIA-CREF). Clapman said the SEC’s upcoming review of proxy rules ought to focus on how companies nominate directors–not on giving shareholders nominating power. “We want to work very hard to improve the quality of nominating and corporate governance committees.”

Clapman’s comments reflect a more moderate view than that taken recently by the Council of Institutional Investors and others, including this editor. His position appears similar to the one expressed by theConference Board’s Commission on Public Trust and Private Enterprise in which John Biggs, Chairman, President and CEO of TIAA-CREF, participated. When asked if TIAA-CREF would use nominating power that might arise from SEC reforms to effect corporate governance reforms, he said it was “too premature to think about that.”

Meanwhile a long-standing campaign for TIAA-CREF to invest five to 10% of social choice account assets ($200-400 million) in companies that are models of social and environmental responsibility drags on. Some are beginning question the amount of democracy within TIAA-CREF itself. Expect a resolution on the issue at a future TIAA-CREF meeting.

Options Fiction to End?

For years, the voices of reason have advocated expensing stock options. I recall Robert A. G. Monks likened the current practice to a favorite Abraham Lincoln joke. How many legs does a dog have if you count the tail? Four; counting the tail doesn’t make it a leg.

Not counting the cost of stock options doesn’t make them free. It is clearly a transfer of wealth from existing shareholders. The current accounting practice contributed greatly to the abuses of Enron and others, with CEOs profiting from short term swings, while long term investors and most employees got left behind.

The Financial Accounting Standards Board finally found its legs and voted unanimously that stock options should be treated as an expense when issued. The board hopes to start discussing what accounting method(s) should be used by the end of May. According to the Wall Street Journal, they’re shooting for an exposure draft by the end of the year, with March 2004 as the target date for a final standard.

The measurement issue will be a significant challenge but at least it is now clear that something closer to honesty is desired. Let’s hope Congress doesn’t block their move again. The April 25th ISS Friday Report says the California delegation is active in sponsoring legislation to keep the current system alive.

The International Accounting Standards Board released its concept proposal in November; we shouldn’t go it alone. While the move will reduce earnings at many companies, high tech firms, the 74 companies in the Standard & Poor’s 500-stock Index that now voluntarily expense options will find themselves ahead of the pack, just where they should be by taking the initiative before being forced to do so. (Accounting Panel Faces Puzzle: How to Measure Options’ Value, WSJ, 4/24/03)

SEC Takes Up Democracy in Corporate Governance!

The Securities and Exchange Commission announced that SEC staff will review current regulations on director elections and submit possible changes to the full commission by July 15th.

Currently, only candidates nominated by a company are included on the proxies distributed to shareholders. If a shareholder group wants to run its own opposing slate in a contested election, it can cost hundreds of thousands of dollars.

Although the SEC upheld a previous decision that allowed Citigroup to refuse a shareholder vote on changing the process to elect board members, the announcement to review regulations and to consider making corporate elections democratic was hailed by corporate governance activists. “There is a desperate need for shareholder democracy and today’s decision was an important step in that direction,” AFSCME Pension Plan Chair Gerald W. McEntee said in a statement.

Les Greenberg, of the Committee of Concerned Shareholders, and James McRitchie, editor of CorpGov.Net, who petitioned the SEC last August said they “hope the Commission will fully consider small shareholders, as well as huge pension funds, when regulations are redrawn.” Their proposal would use the low thresholds of proxy resolutions for shareholder nominations. Anyone who has held at least $2,000 of stock for a year would be able to nominate a director and have that person’s name appear on the corporation’s ballot. “Entrenched Managers and Directors will only improve corporate governance when they can be held accountable, e.g., voted out of office and replaced with Directors chosen by shareholders,” said Les Greenberg.

“If the SEC wants investors to do a better job of monitoring, it has to give them the tools to adequately police companies,” said Patrick McGurn, special counsel at Institutional Shareholder Services. After Greenberg and McRitchie filed their petition last summer, McGurn called the movement for an open ballot the “Holy Grail of corporate governance.”

Sarah Teslik, executive director of the $3 trillion Council of Institutional Investors, which represents large pension funds, called the announcement “the biggest thing that has come out of the commission in my 20-year career” as a corporate governance advocate. A recent background paper by CII indicated the petition to the SEC by Greenberg and McRitchie to amend Rule 14a-8 had “re-energized” the “debate over shareholder access to management proxy cards to nominate directors and raise other issues.” See Equal Access – What Is It? Teslik said she expected companies to wage a vocal campaign to make sure reforms did not give too much weight to shareholders, and to demand other changes.

If the SEC grants proxy access, it will be the equivalent to the American Revolution for shareholders,” said Deborah Pastor, vice president of eRaider.com, which petitioned the SEC last September to reform the director election process.

“The current rules concerning shareholder proposals and director elections are clear and we are enforcing them as such, but the time has come for a thorough review of the proxy rules and regulations to ensure that they are serving the best interests of today’s investors, while at the same time fostering sound corporate governance and transparent business practices,” said William H. Donaldson.

The review will address shareholder proposals, director elections, proxy solicitations, shareholder takeovers of boards through proxy fights, and disclosure requirements imposed on large shareholders and groups of investors.

It will be a “top-to-bottom review” of the rules, said Alan Beller, director of the corporation finance division, in an effort to improve corporate democracy. He indicated that if the SEC then decided to draft new rules, they could be in place in time for next year’s season of annual meetings.

The SEC will solicit the opinions of pension funds, shareholder advocates, Corporate America, and the legal community. CEOs and entrenched managers who are accountable to no one are likely to mount a concerted lobbying campaign. They have consistently opposed investors’ efforts to gain anything like “equal access” to the official company ballot.

I am convinced this is potentially most important reform in corporate governance during my lifetime. Researchers have found that “firms with stronger shareholder rights had higher firm value, higher profits, higher sales growth, lower capital expenditures, and fewer corporate acquisitions.”

The movement to more democratic forms of corporate governance by empowering owners is important not only for creating wealth; it cuts directly to our ability to maintain a free society. As Monks and Minow have noted, with the slight exaggeration suitable for book covers, “Corporations determine far more than any other institution the air we breathe, the quality of the water we drink, even where we live. Yet they are not accountable to anyone.” (Power and Accountability)

The keys to creating wealth and maintaining a free society lie primarily in the same direction. Both require that broad-based systems of accountability be built into the governance structures of corporations themselves. By Ending the Wall Street Walk, and accepting the responsibilities that come with ownership, institutional investors have the potential to act as important mediating structures between the individual and the dominant institutions of our time, the modern corporation. CalPERS, CII, Pax World, Domini, Calvert, Citizens and others have already taken the lead in many areas. This reform will further empower their efforts and will awaken other investors to their role as responsible citizens.

American workers have approximately $6 trillion in retirement assets such as pensions, stock plans and 401(k) savings plans. Who controls these assets? Who executes voting rights? How do the workers benefit? The answers to these questions will be raised as the SEC investigates the lack of democracy in corporate elections. Let’s stop fighting the symptoms of undemocratic corporate structures and start participating in the institutions which most shape our modern society.

I urge readers to e-mail comments to Mr. Jonathan G. Katz, Secretary, SEC on this important issue. Put Petition File 4-461 in the subject line and include your name and professional affiliation. If attaching a document, indicate the format and please cc: jm@corpgov.net &Information@ConcernedShareholders.com. See SEC Rulemaking Petition File No. 4-461. Also comments e-mailed to the SEC. Press Release: Petition for Democracy in Corporate Elections. You may also want to look at the SEC’s Instructions on Submitting Comments and see the SEC’s press release on their upcoming review.

For press coverage see: The Key to Director Independence, SocialFunds, 4/1/03; SEC Ponders Corporate Democracy, CBS MarketWatch, 4/14/03; S.E.C. to Review Policy on Board Elections, New York Times, 4/15/03; THE MARKET: Is “shareholder democracy” an oxymoron?, Kansas City Star, 4/13/03; Other view: Dab of democracy in boardrooms, Thomas W. Joo, Sacramento Bee, 4/4/03;DEMOCRACY IN CORPORATE ELECTIONS, Shareholder Action Network, 8/2/03. See SEC press release. Please let us know by e-mail if you spot additional articles.

McDonough to Head Public Company Acccounting Oversight Board

The Securities and Exchange Commission unanimously selected Federal Reserve Board executive William J. McDonough to lead the new panel designed to reform the accounting industry after two years of scandals that devastated the stock market.

McDonough, 68, has served as president of the New York Federal Reserve Bank for the past decade, a position that afforded him close contact with Wall Street and the international investment community. He has long
dealt with difficult economic issues, and has been mentioned as a possible successor to Fed Chairman Alan Greenspan.

Although McDonough has sat on the boards of various charities, including the New York Philharmonic and the Carnegie Corporation of New York, he has not served as a director of a public company.

Under the Sarbanes-Oxley law, the commission is supposed to certify the accounting board is up and running by April 26.

His appointment drew widespread praise from Capitol Hill; from Eliot Spitzer, the New York attorney general; and from the American Institute of Certified Public Accountants, the trade group that bitterly fought
government regulation and was said to have tried to block the appointment of Mr. Biggs. The Institute yesterday called the McDonough appointment ‘a critical step in moving the process forward.’

The appointment of Mr. McDonough will be for a five-year term. Under the law, he could be named by the S.E.C. to another five-year term. Unlike most people he said, “I adore accounting theory. I think it
is one of the most interesting things that one can get involved in.”

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Corporate Governance: Financial Service Firms

Federal Reserve Board Governors Susan Schmidt Bies is scheduled to participate in “Corporate Governance: Implications for Financial Services Firms” panel at the Federal Reserve Bank of Chicago’s 39th Annual Conference on Bank Structure and Competition, on May 8th at the Fairmont Hotel, 200 North Columbus Dr. For registration contact: Regina Langston at 312 322 5641 or regina.langston@chi.frb.org. Information: Douglas Evanoff, 312 322 5814 or devanoff@frbchi.org; hotel: 312 565 8000

Vanguard Sues

The Vanguard Group mutual fund filed a civil suit against Citibank and Salomon Smith Barney, alleging the firms fraudulently sold it $70 million of worthless Enron bonds.

Vanguard claims that the two firms collaborated to disguise the defunct energy trader’s mounting debt to Citibank using commodity investment accounts, which were used to back Enron bonds. Those bonds were then sold to investors, including Vanguard, and turned out to be worthless after Enron went bankrupt in 2001, the lawsuit alleges.

Vanguard said its funds were duped into buying the bonds through “false and misleading'” financial statements, in which Citibank failed to disclose Enron’s true financial situation and its own role in the deals. Vanguard said the scheme was discovered as the result of U.S. Senate hearings on Enron over the last year.

Citigroup, the parent company of Citibank, and Salomon Smith Barney did not comment on the lawsuit but Citigroup testified that it “acted at all times in the good-faith belief that the transactions complied with existing law and standards.” (Mutual Fund Market News, 4/14/03)

The suit demonstrates one method mutual funds can use to increase their effectiveness in monitoring. Along with recent rules requiring mutual funds to disclose their votes, it is another good sign that mutual funds may be moving to improve corporate governance.

Donaldson Calls for Broader Director Candidate Pool

SEC Chairman William Donaldson testified before a Senate Appropriations subcommittee that companies need to look beyond the usual suspects for director candidates. Fritz Hollings (D-S.C.) said that in the early 1960s, boards were composed of “drinking buddies.” Today it appears that CEOs have a three-year term to “get the stock up, take the money, and run.”

Donaldson said that board members need to determine how many boards they can realistically serve on given the heightened responsibilities and time commitment that such service now requires. He sees a need for a new professional cadre of directors  — both young people, better trained in new efforts by business and law schools and the NYSE, and older people not previously given the chance. These directors should expect more responsibility and to spend more time at their jobs. This will mean serving on fewer boards and, where they do serve, hiring corporate officers who understand the enhanced role of today’s board.  

The New York Stock Exchange, law schools, and other institutions are providing director training for such candidates, and Donaldson said the SEC supports their efforts. “We want to help them do that [train directors], and we intend to help them do that,” he said. Donaldson was appearing before the subcommittee in support of a fiscal 2004 budget request of $841 million for the SEC, the largest amount ever requested for the agency. Its budget in 2002 was officially $438 million but supplemental appropriations brought it to an operating level of about $540 million. (see New SEC Chief on Track?, The Motley Fool, 4/9/03; SEC Chief Says Director Candidate Pool Should Be Deeper, ISS Friday Report, 4/10/03)

ACGA Website Launched

The Asian Corporate Governance Association (ACGA), a non-profit membership organization based in Hong Kong and operating around Asia has launched its website and has been steadily adding content to it. It contains updated news on corporate governance in Asia, such as the elections for the board of Hong Kong Exchanges and Clearing (HKEx) where Oscar Wong, CEO of BOCI-Prudential Asset Management and David Webb, a leading commentator on corporate governance in Hong Kong and its most outspoken retail shareholder activist, are trying to give minority shareholders representation for the first time.

The site also includes coverage of codes and rules, and information about what ACGA itself is doing, such as are up to, such as assisting investors developing corporate governance screens and creating the ACGA Quick Assessment, a cost-effective and efficient tool for assessing the governance practices of companies.

Content has not been completely uploaded but we see that it will be extensive. They are certainly building a firm foundation to create a strong and sustained voice for corporate governance reform in Asia.

SEIU Win at HP

Hewlett-Packard shareholders have approved a non-binding resolution calling for management to submit senior executives’ severance packages to investors for approval. The company says it will consider the recommendation, the outcome of which was initially deemed “too close to call” after Wednesday’s annual meeting. The measure was introduced by the Service Employee International Union in the wake of a $14.4 million pay package that former Compaq chief executive Michael Capellas received when he left HP last November. The company says board members will give the shareholder recommendations “due consideration.”

“Due consideration is like code for saying we’ll do nothing, or we’ll talk about it in the elevator between now and the next annual meeting,” said John Chevedden, an investor and shareholder advocate in Redondo Beach, Calif., who helped draft the shareholder-approved rule related to poison pills which also passed. (see H-P shareholders are ‘due’ respect. Commentary: Board should honor shareholder wishes, CBS.MarketWatch.com, 4/9/03)

Free DOL Guides

The Department of Labor has launched elaws Advisors, an online labor law tutorial, to provide DOL’s customers with access to clear, consistent and timely information about the laws affecting America’s workplaces. DOL also provides a free 102-page Employment Labor Law Guide on the department’s main laws and regulations for employers needing introductory information on wages, benefits, safety and health, and nondiscrimination policies for their businesses. For the booklet, call 866-4-USA-DOL.

SRI Funds Spared Outflows

While domestic equity mutual funds posted outflows of more than $27 billion during 2002, socially responsible investing (SRI) mutual funds saw net inflows of more than $1.5 billion, according to Lipper Inc. During the first months of 2003 the trend continues. (From SRI funds, a more sophisticated tack, The Christian Science Monitor, 4/7/03)

Poison Pill Resolution Passes at HPQ with 55%

The shareholder proposal called for a shareholder vote on any future poison pill.

Activist John Chevedden points out the Hewlett-Packard position on the proposal was defeated at their April 2nd annual meeting in spite of:

• The company’s special solicitation of shareholders, per its March 21 filing with the SEC
• The company terminated its poison pill on Jan. 21, 2003
• HPQ great expertise in soliciting shareholders to change their votes.
  

Two other proposals had strong showings:

• Shareholder vote on golden parachutes – “Too close to call”
• Expense stock options – 45%

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Scott Adams Lampoons CEOs

Dilbert creator, Scott Adams, has been poking fun of CEO excesses. A recent strip showed a CEO trying to blend in as an “average guy” another pokes fun of recruitment. Apparently, the imperial CEO is not dead in the popular press.

Elson Stages Corporate Governance Series

Charles Elson, Woolard Professor and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware in Newark, and will feature nationally recognized experts on a variety of issues.

Sessions will meet from 9:30-10:45 a.m., Thursdays, beginning April 10 and concluding May 8, in 125 MBNA America Hall. Members of the campus community and the public are invited to attend, and if interested should call the Weinberg Center for Corporate Governance at (302) 831-6157.

The opening panel on April 10 will look at audit committee reform and financial misconduct. On April 17, the panel will discuss corporate governance guidelines. The panel April 24 will consider corporate law and the impact of increasing federalism on Delaware’s corporate franchise. The state has long been a haven for incorporation and has developed a unique and important place in corporate law both nationally and internationally. The final panel May 8 will consider the role of the dissident director. Panelists include experts from businesses, academia, pension funds and the press. (See Corporate governance series will open April 10)

Transparent Companies Yield Better Returns

Companies that voluntarily disclose more detailed information about their corporate governance practices yield higher shareholder returns than less transparent companies, according to a new study by Sibson Consulting and Spencer Stuart based on 2001 annual reports and proxies of 385 large- and mid-sized public companies, most of which were released in the first half of 2002.

The study measured how many of 52 non-mandated disclosures companies made, ranging from information about director peer reviews to whether or not the company has formed a governance committee. Companies only disclosed 4.7% of the 52 items; large companies disclosed 8.2%, compared with mid-sized companies, which disclosed 3.9%.

Companies with governance committees disclosed 7.2 percent of the items, identifying nearly three times as many governance practices and polices as those companies that hadn’t formed a governance committee.

Higher scoring companies had significantly higher median five-year shareholder returns than lower-scoring companies, according to the report. Pfizer Inc. ranked first in the report’s governance transparency metric, followed by Harleysville Group Inc., Household International Inc., which is being acquired by HSBC Holdings, Eli Lilly & Co. and Hawaiian Electric Industries Inc. (Yahoo! News, 3/31/02)

Mutual Fund Directors Earned More in 2002

As the profit of mutual fund investors tumble, mutual fund directors got an aberage 8% pay raise in 2002. Director pay at the top 50 fund companies increased 8%, with $113,000 their median compensation, according to Management Practice.

Putnam had the highest-paid directors. For example, John Hill, vice chairman of First Reserve, a private equity company specializing in energy, made $388,250 last year. Fidelity directors still earned a lot by industry standards, however, pulling in an average $262,450 last year. That is down slightly from an average $266,050 in the previous year, according to regulatory documents. Janus directors made between $94,000 and $184,000 last year, less than they earned in 2001, when they each pulled in $185,000, filings showed.

Yet George Martinez, co-founder of FundWatchDog, say that, “today, there’s a lot more responsibility resting on their shoulders than there has been historically, especially with a lot of regulations coming down the pike in the last 18 months.” (Mutual Fund Market News, 3/31/03)

Donaldson Calls for Boards to Rein in Executive Pay

SEC Chairman William Donaldson called on corporate boards to rein in pay and perks for CEOs, saying that “In some cases, the CEO has become more of a monarch than a manager.”

Donaldson told a group of business leaders that investor anger has been made worse “by the perception and, in many cases, unfortunately, the reality that those at the top have not shared their loss — that those at the top have continued to enjoy massive salaries, bonuses and perks unrelated to performance.” Donaldson, who earned $18.7 million three years ago as chairman of Aetna Inc. did not propose any specific reforms. Instead, he told companies and directors that there was no one-size fits all reform.

Treasury Secretary John W. Snow left CSX Corp. last month with a $68.9 million pension — a lump sum of $33.2 million, plus $2.9 million a year. That’s even more than the $2.1 million of salary and bonus he made last year. CSX defended Snow’s benefits as “consistent with executives of other Fortune 500.” Meanwhile, CSX paid nothing at all in federal income taxes on its $934 billion in U.S. profits over the past four years. (The Corporate Reform Weekly: Citizen Works’ look at the Campaign for Corporate Reform,Volume II, #12)

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