Shareholders at Earthgrains (NYSE: EGR) voted on a resolution brought by the AFL-CIO and the Bakery, Confectionery, Tobacco Workers and Grain Millers (“BCTGM”) to link executive compensation to employee satisfaction, participation, and training. The proposal urged the Board of Directors to consider such measures of human capital development when awarding performance-based pay to senior executives.
BCTGM Secretary-Treasurer David Durkee explained that, “Earthgrains has repeatedly cited its Total Quality Commitment program as the linchpin of company success and shareholder value, and for that reason linking CEO pay to human capital related performance measures is in the best interests of all shareholders. Such a move would encourage Earthgrains to adhere to constructive policies based on the best practices in labor-management partnerships.”
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Earthgrains’ current executive compensation practices appear to be out of step with its Total Quality Commitment philosophy, noted union representatives. According to the company’s proxy statement, earnings targets for executive bonuses were adjusted to exclude the impact of a 28-day strike. “Strikes are a significant indicator of employee dissatisfaction, and rewarding executives for a prolonged strike costing millions does a disservice to shareholders,” explains AFL-CIO Secretary-Treasurer Richard Trumka.
Earthgrains CEO Barry Beracha was also questioned about his plans following the proposed merger with Sara Lee. Beracha’s employment contract allows him to voluntarily exercise his golden parachute 11 months following the merger, entitling him to three years salary and benefits. His stock options, restricted stock, and supplemental executive pension will also immediately vest. According to Trumka, “large CEO pay packages make golden parachutes redundant and an unnecessary expense to America’s working families who are shareholders through their pension funds.”
