Executive pay, not South Africa or the environment, is expected to dominate the agenda of emotional issues during the 1992 shareholder annual meeting season, which begins next month.
A movement against the gluttonous compensation deals that many top corporate officers award themselves has been spurred by federal regulators, who are making it easier for shareholders to understand, review and speak up about the financial rewards management receives.
"Companies are always defensive about it because they don't have an explanation," said Ralph Whitworth, president of the United Shareholders Assn., a Washington-based lobby group pressing for more accountability over how top management is paid.
He predicted executive pay will "be raised at virtually every annual meeting because it has become such a hot topic."
The issue of executive pay has taken on more significance this year because much of the nation is engrossed in a recession, marked by profound cutbacks and layoffs at many corporations where top managers continue to make more money.
Last year corporate profits fell by 7%, while chief executive pay advanced an average 7%, the United Shareholders Assn. has calculated.
President Bush's trip to Japan exacerbated the issue. When American bosses on the junket complained about what they called unfair Japanese competition, the spotlight suddenly focused on their paychecks.
Chrysler Corp. chief Lee A. Iacocca, for example, made $4.5 million in 1990, while Toyota's Shoichiro Toyoda reportedly earned $690,000 the same year. Chrysler is one of the financially weakest auto makers and Toyota the strongest.
Just as shareholder proposals on South Africa investments and pollution have made their way onto annual meeting agendas in years past, shareholder voices are beginning to be heard on the executive pay question. Their proposals to restrain pay will appear on the proxy ballots of several major companies at meetings this year.
A few months ago a disgruntled shareholder wrote Battle Mountain Gold, suggesting the company's executives slash their pay 30% until profits rebound. The Houston-based concern lost $1.2 million on revenue of $170.2 million in 1991.
In years past, such a letter wouldn't have raised an eyebrow at the Securities and Exchange Commission, which rules on whether companies must put such proposals to a shareholder vote.
But the SEC is no longer automatically siding with management in agreeing that compensation issues are ordinary business and not a topic for public scrutiny.
The regulatory agency on Thursday announced that companies--this year 10 are affected--may not exclude shareholder proposals on pay matters at annual meetings.
A non-binding pay-cut proposal is expected to appear on the Battle Mountain shareholder proxy ballot.
"We're not hiding anything. We do a good job of explaining compensation," said Battle Mountain Vice President Joseph Mazur, adding that it is too early to say how much money the top executives made in 1991.
"But companies like ours regret the nuisance factor and the publicity these kinds of things yield," he said.
Companies also aren't pleased with other efforts by the federal government to place restraints on executive pay.
Many are upset by two bills in Congress, for example, that would give shareholders a say in executive compensation and tighten the rules for how it is accounted for in corporate financial statements.
"Issues of corporate governance, including decisions concerning executive compensation, are matters properly within the discretion of a company's board of directors," said Jim Manion, general counsel to Equimark Corp., a Pittsburgh-based banking company.
At the Equimark annual meeting in April, shareholders will vote on whether to limit severance pay to executives if corporate performance isn't adequate, the suggestion of a single shareholder. The SEC recommended the proposal--after some modifications--appear on the ballot.
At Baltimore Gas & Electric Co.'s annual meeting in April, shareholders will decide whether to cap top executives' pay at 20 times the salary of the average employee.
Spokesman Art Slusark said the company's chairman earned $510,000 in salary and other cash compensation last year. That is far less than the proposal would allow, considering the average employee earns $41,000. But Slusark said he did not know whether top executives exercised any lucrative stock options, which could have boosted their pay substantially.
Executive pay is comprised of salary, bonus and long-term incentives, typically stock options, or the right to sell stock at a specific price.
It is the stock-option incentives that many shareholders are finding insidious. Formulas for calculating stock option values are murky and difficult to understand. But the SEC has called for changes in proxy voting rules that will require clear explanation of current compensation packages.