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CWA Sways GE on Executive Pay Formula
General Electric, in response to a shareholder proposal submitted by CWA, has agreed to exclude pension fund income from a factor used for determining executive compensation.
GE's action came as the union prepared to mobilize workers and to present a range of proposals aimed at limiting executive compensation at several of its employers' annual shareholder meetings.
The decision addresses a distorted - and inflated - definition of "earnings per share," one of the key measures GE's board of directors until now has used as a measure of top executives' performance and a factor in setting their bonus and other incentive compensation.
Linking executive pay to pension income creates an incentive for companies to cut pension benefits for workers and to withhold cost-of-living increases. GE has frozen pension benefits at 2000 levels while continuing to lay off workers and increase health care co-payments for IUE-CWA members.
"This is a step in the right direction," said IUE-CWA President Ed Fire told the Wall Street Journal on Feb. 21.
"We hope GE will take further steps to address the huge gulf between executives' and front line workers' pensions and pay," he said. "Basing compensation for 4,000 executives on the performance of a pension plan built up by the contributions of 200,000 GE workers is simply not fair."
"GE has taken an important first step that we hope other CWA employers will consider," CWA President Morton Bahr said.
The huge conglomerate's pension plan generated more than $2 billion in income for 2001, or about $1.4 billion after taxes - about 10 percent of the company's total $14.1 billion in earnings.
GE's board will adopt a new long-term incentive plan in March for compensating executives through 2006. While, as in the past, the plan will use earnings per share as a measure of executive performance, the board's compensation committee will see two figures: total earnings per share and earnings per share without pension income.
GE has also agreed to provide information and continue discussions with the union regarding the management and financial integrity of the GE pension system.
CWA has agreed to withdraw its shareholder proposal. The union is supporting similar proposals at other companies including IBM.
IUE-CWA will present other proposals at GE's annual meeting April 23 in Charlotte, N.C., seeking shareholder approval of executive severance packages and asking shareholders to adopt International Labor Organization standards concerning fundamental workers' rights, including the right to organize.
In a related development, the company responded to a shareholder resolution filed by the AFL-CIO by agreeing to end its "special salary deferral plans" for the five top-paid executives, the Financial Times reported on Feb. 11. The plan allowed the executives to defer annual salary and receive an above-market interest rate.
GE's action came as the union prepared to mobilize workers and to present a range of proposals aimed at limiting executive compensation at several of its employers' annual shareholder meetings.
The decision addresses a distorted - and inflated - definition of "earnings per share," one of the key measures GE's board of directors until now has used as a measure of top executives' performance and a factor in setting their bonus and other incentive compensation.
Linking executive pay to pension income creates an incentive for companies to cut pension benefits for workers and to withhold cost-of-living increases. GE has frozen pension benefits at 2000 levels while continuing to lay off workers and increase health care co-payments for IUE-CWA members.
"This is a step in the right direction," said IUE-CWA President Ed Fire told the Wall Street Journal on Feb. 21.
"We hope GE will take further steps to address the huge gulf between executives' and front line workers' pensions and pay," he said. "Basing compensation for 4,000 executives on the performance of a pension plan built up by the contributions of 200,000 GE workers is simply not fair."
"GE has taken an important first step that we hope other CWA employers will consider," CWA President Morton Bahr said.
The huge conglomerate's pension plan generated more than $2 billion in income for 2001, or about $1.4 billion after taxes - about 10 percent of the company's total $14.1 billion in earnings.
GE's board will adopt a new long-term incentive plan in March for compensating executives through 2006. While, as in the past, the plan will use earnings per share as a measure of executive performance, the board's compensation committee will see two figures: total earnings per share and earnings per share without pension income.
GE has also agreed to provide information and continue discussions with the union regarding the management and financial integrity of the GE pension system.
CWA has agreed to withdraw its shareholder proposal. The union is supporting similar proposals at other companies including IBM.
IUE-CWA will present other proposals at GE's annual meeting April 23 in Charlotte, N.C., seeking shareholder approval of executive severance packages and asking shareholders to adopt International Labor Organization standards concerning fundamental workers' rights, including the right to organize.
In a related development, the company responded to a shareholder resolution filed by the AFL-CIO by agreeing to end its "special salary deferral plans" for the five top-paid executives, the Financial Times reported on Feb. 11. The plan allowed the executives to defer annual salary and receive an above-market interest rate.