NEW YORK — A year ago, SBC Communications Inc. successfully blocked shareholder resolutions that sought to link executive pay to performance, arguing that the measures would scare away talent and hurt the telecom giant's competitiveness.
SBC has since changed its mind and is implementing a new executive compensation system. One reason for the change: independent board director James Henderson.
Henderson, the new head of the board's executive compensation committee, decided that shareholders had a point. So he hired an outside consultant, talked with some of SBC's largest shareholders and, with his committee, proposed the new system.
"A shareholder resolution meant there was some dissatisfaction in the shareholder ranks. And if you're trying to be responsible to shareholders, it was logical ... to devise a compensation system that was more in their interests," said Henderson, a retired chief executive of Cummins Inc.
As this year's annual meetings season gets underway, independent directors are taking a higher-profile role in balancing shareholder and management interests. The change reflects new regulations -- approved in the aftermath of the Enron, WorldCom and Tyco International scandals -- that have forced companies to increase the power of independent directors.
Although SBC's plan has won over some critics who found the old pay policy excessive, skeptics warn that such positive results are still far from typical and say the term "independent" provides no guarantee of an impartial advocate for shareholders.