Black & Decker options vote fails

But 21% do support proposal to tighten tie to performance

April 26, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

A shareholder proposal that would have directed Black & Decker Corp. to more closely tie executive stock options to company performance failed to pass at the company's annual meeting yesterday but received a rather surprising number of votes, and the sponsors said they could be back with it next year.

The proposal was submitted by New York City's comptroller's office, which is the investment adviser and trustee for city retirement systems that own 182,000 Black & Decker shares. The comptroller's office sent one of its analysts to the meeting in Towson to speak in its support.

"Executive performance must be measured against meaningful benchmarks, such as the average performance of a peer group or the [Standard & Poor's] industry index," said Malaika O'Rourke. "In rising stock markets, like that of the 1990s, executives who hold stock options generally are able to cash in, even if their company stock rises more slowly than, or significantly lags, the overall market. The rising tide lifts all boats."

The proposal, which was opposed by the company, garnered 21 percent of the vote.

"That's a high vote total," said Ann Yerger, director of research at the Council of Institutional Investors.

"The premise is that if the S&P is up 10 percent and your company is up only 9 percent, the option price would go up 10 percent from the grant date," Yerger said. "The executive would only make money if the performance of the stock exceeds the underlying index."

The S&P 500 fell 10 percent last year while Black & Decker's shares fell nearly 25 percent.

"We feel executive compensation is an important issue," said David Neustadt, a spokesman for the comptroller's office. "I wouldn't be surprised if we resubmitted it next year."

Nolan D. Archibald, the Towson-based toolmaker's chairman, president and chief executive, did not remark on the proposal at the meeting, held at the Sheraton Baltimore North Hotel, and he declined to comment afterward.

However, the company did spell out its opposition to the measure in its proxy statement.

"In a volatile stock market, changing to indexed, premium-priced or performance-vesting options would threaten Black & Decker's ability to retain its senior executives and to attract other highly qualified executives," the statement said, adding that stock options are inherently performance-based because executives can cash in only if the stock price rises.

"It would put us at a considerable disadvantage in the marketplace," said B&D spokeswoman Barbara Lucas. "If the rules changed for all of corporate America for how they administer options plans, that might be a different scenario."

In 2000, Archibald was paid a base salary of $1.1 million (an 8 percent increase over 1999), a bonus of $1.25 million (a 43 percent decline), "other" compensation of $154,000, which included use of a company airplane, and more than $30,000 in financial counseling fees.

He also received 1 million options with an exercise price of $42.78 -- above B&D's close yesterday of $40.25. Half the options can be exercised in three years and half in five years.

Shares were trading as high as $63 in June 1999 but began to fall in July.

On Tuesday, the company reported that its first-quarter recurring profit was down nearly 30 percent to $33.1 million and its sales were down nearly 6 percent to $979 million. For all of 2000, profit declined 6 percent to $282 million, and sales rose 9 percent to $4.56 billion.

Calvert Asset Management Co. of Bethesda also submitted a proposal asking B&D to adopt standards for issues related to the environment and worker health and safety. That proposal, also opposed by the company, got 11 percent of the votes.

Another failed proposal that the company opposed would have forced B&D to submit at least two candidates for every open board seat.

Archibald took a moment at yesterday's meeting -- which lasted 15 minutes -- to acknowledge former Chairman Alonzo G. Decker Jr., who retired in January just before his 93rd birthday. The son of one of the company's founders, Decker had been a director for 60 years.

"Al, we will sure miss you," Archibald said. "Your dedication to excellence and innovation has set a high standard for this company, and you are a role model that we revere."

Decker said after the meeting that his retirement "doesn't change a thing."

"They wouldn't do anything I wouldn't like."

The meeting's brief duration, he said, "shows you things are going pretty good."

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