SEIU Seeks To Claw Back USD5 Billion in Exec Compensation

The SEIU Master Trust, a consortium of pension funds with approximately USD1.3 billion in assets, has thrown down the gauntlet to executives profiting off the risk shouldered by shareholders
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The SEIU Master Trust, a consortium of pension funds with approximately USD1.3 billion in assets, has thrown down the gauntlet to executives profiting off the risk shouldered by shareholders.

In letters addressed to the Boards of Directors of 29 major companies in its investment portfolio, the SEIU Master Trust demanded that directors investigate a total of more than USD5 billion of incentivized executive pay that may have been tied to poorly understood derivatives and other financial instruments that are now worthless.

Its bad for shareholders and dangerous for our economy when executives profit off of complex derivatives and inflated stocks, said SEIU President and SEIU Master Trust Chair Andy Stern. The collective choices of top executives to reward themselves despite their failure to deliver a profit on their investments have driven stock prices into the ground, negatively impacted our pension funds, and left our economy in shambles.

In the letters to the Boards of Directors, the SEIU Master Trust argues that corporate compensation payments based on false economic metrics may be recouped, based on U.S. law. The letters further demand that the companies boards overhaul their executive compensation structure so top executives do not reap bonuses and other incentivized pay rewards regardless of the companies performance.

Its as if these guys got a windfall payoff for betting the familys savings on the wrong horse. A fundamental duty to shareholders has been violated, and we expect immediate action by the Boards of Directors to put a stop to these unmerited executive payouts, Stern continued.

Since 2005, the top five most highly paid executives at the 29 firms received a total of more than USD3.5 billion in cash and equity pay and over USD1.5 billion in stock options. The companies include the most well known names in banking, insurance, and financial services, such as Wells Fargo, Citigroup, American Express, AIG, Goldman Sachs, and McGraw-Hill.

At the same time of the sizable executive payouts, the share price of each of the 29 firms has decreased dramatically since 2005. For example, American Express dived from USD66 to USD16, PNC Financial Services from USD81 to USD31, and Moodys Corp. from USD75 to USD23.

The recent collapse of the companies stock prices show that the economic metrics used by the boards in justifying these compensation payments were worthless, and that the companies stock prices were artificially inflated, said Stephen Abrecht, Executive Director of the SEIU Master Trust. If the Boards of Directors do not meet their obligation to shareholders to look into how executive pay was incentivized and determine whether bonuses were paid to executives based on false presumptions, the SEIU Master Trust reserves the right to take legal action.

The SEIU Master Trust, which has total assets of more than USD1.3 billion and is an active proponent of sound corporate governance as a vital means to protect and enhance shareholder value, has engaged leading shareholder activist and corporate governance law firm Grant & Eisenhofer P.A., to prepare and write the letters to the Boards, as well as to monitor responses by the companies boards.

Hardworking people all around this country are outraged over examples of excessive rewards for financial executives short-sighted, foolish behavior. From AIG to the 28 other firms whose bottom line is directly related to the financial security of millions of investors, its time to hold these bad actors accountable. We expect the boards of these companies to step up to meet their obligations to shareholders and see if there is a legitimate and reasonable claim that executive compensation be clawed back, Stern concluded.