NEW YORK -- For top executives, there have been better years to take home multimillion-dollar salaries.
Following generations of impunity over compensation, executives at Bell Atlantic Corp. and Baltimore Gas and Electric Co. -- along with their counterparts at eight other companies -- have become the newest and most notable targets in the season for annual meetings, which runs from now until mid-May.
Big compensation contracts have become the outrage of the moment, making them good fodder for the one chance shareholders have each year to confront senior executives with their concerns. Beginning in the mid-1980s with the surge in proposals on social issues such as investments in South Africa, the annual meeting has emerged as forum for the most controversial issues.
Submissions on non-social issues, loosely referred to as corporate governance, boomed in the late 1980s as companies moved to restrict takeovers, to the ire of shareholders interested in the financial rewards of a possible buyout. But they have declined a bit, largely because some of the biggest players, most notably the huge California Public Employees Retirement System, have decided to work directly with managements this year instead of submitting proxy resolutions.
But many disgruntled shareholders remain. The Investor Responsibility Research Center, a non-profit group that tracks 1,500 companies, says more than 200 issues on governance have been filed this year and that there are more than 180 others on South Africa, military investment, environmental responsibility and other social concerns.
Most of the governance motions tread familiar ground: Major shareholders want to be able to vote their shares confidentially, and they hate anti-takeover provisions such as "poison pills" and golden parachutes."
Some new ground is being broken this year in the proposals targeted at corporate boards, with several proposals calling for minority and labor representatives.
But, without a doubt, the biggest change this year is the talk of compensation. Previously excluded by the Securities and Exchange Commission under a provision giving managers exclusive control over ordinary business operations, the issue suddenly became a distinctly unordinary one.
The surge in multimillion-dollar pay packages has come at the same time as declining profits and brutal cost-cutting.
In January, the SEC unexpectedly allowed a compensation-related motion submitted to Bell Atlantic to appear on this year's proxy. And in February, the SEC went further and not only encouraged compensation-related motions (as long as they were only advisory), but said it would introduce its own compensation-related reforms.
The new SEC attitude was revealed too late for any direct response to make it onto agendas of this year's spring meetings. That ruled out almost all the large institutional investors from submitting resolutions this year, although next year could bring a deluge.
But despite the late date, dozens of other proposals had already been submitted, mostly by small investors who, writing in non-legalese, reflected heartfelt messages, said Peg O'Hara, head of the corporate governance unit of the Investor Responsibility Research Center.
What do these people want? The Rev. Leo J. Conti of Evansville, Ind., who owns 76 Bell Atlantic shares he inherited, asked for a vote to limit short-term incentive plans for the company. In 1990, those incentive plans boosted Chief Executive Officer Raymond Smith's compensation to $2.4 million from $628,000.
"You add it all up and it seemed like a basic injustice for consumers," Mr. Conti said yesterday. "Somebody has to pay these huge salaries."
A prior proposal submitted in 1988 was rejected, Mr. Conti said, but sensing a different attitude, he submitted a four-page, handwritten letter to the SEC on what he considered "the essence of ownership," that is, "the right to have a voice on substantive matters." The SEC agreed.
"I think it will get the overwhelming vote of the peanut shareholders like myself," he said.
John J. Phillips and Lois D. Phillips of St. Petersburg, Fla., wan BG&E to limit its top pay to no more than 20 times the compensation of the average employee. "This will assure shareholders and employees that hard earned profits will be used . . . to build a better company for all of us, not just for the gain of a few," the couple wrote.
At Grumman, a defense contractor experiencing the painful contraction of government defense budgets, Bruce Gatley of Smithtown. N.Y.,wants bonuses to executives to be eliminated until the company's share price and dividends top their peak level of 1986.
Unreasonable? There aren't any rules on pay, although Congress is considering some legislation, for instance, limiting the deductibility of a top executive's pay to $1 million annually.
L Companies, to no one's surprise, are fighting these motions.
Bell Atlantic urges shareholders to vote against Mr. Conti's proposal.