The AFL-CIO turned up the heat on executive compensation Monday, naming six companies -- including Thousand Oaks-based Amgen Inc. and San Diego-based Sempra Energy -- as "case studies of excessive chief executive pay."
The labor organization, which in recent years has become increasingly vocal about what it believes are outsized executive pay levels, said it was using the six firms to highlight some of the major compensation issues facing shareholders at corporate annual meetings this spring.
Pay has become a hot-button issue for shareholder activists. Union pension fund-sponsored shareholder resolutions aimed at reforming executive compensation plans have been filed at 140 companies this year, said Brandon Rees, senior research associate in the AFL-CIO's Office of Investment in Washington.
The resolutions, although usually nonbinding, include calls to rein in "golden parachute" payments to fired executives; seek shareholder approval for certain executive pensions; and demand that companies clearly disclose the costs of granting stock options.
Many activists also are pushing boards of directors to more closely tie executive pay to corporate performance.
"There is a continuing disconnect between CEO pay and performance," Rees said. The six companies the AFL-CIO named Monday "are emblematic of the problem," he asserted.
The labor group said Amgen CEO Kevin W. Sharer had cashed in millions of dollars in stock options in recent years, but that he did not own any of the biotech firm's shares outright.
"We think executives should have some skin in the game," Rees said. Sharer "has profited significantly from selling his shares at the same time as shareholders have seen the value of their holdings stagnate."
Amgen stock, which closed at $59.33 on Nasdaq on Monday, up 65 cents, has mostly traded between $50 and $70 since 2000.
Sharer has cashed in $42 million in stock options over the last five years and owns $2 million in Amgen stock in a family trust, but he does not directly own any shares, the AFL-CIO said.
In 2004, Amgen granted Sharer options worth $5.4 million, in addition to a $1.3-million salary and a $3.7-million bonus, the AFL-CIO said.
Amgen changed its rules in 2002 to require company executives and directors to own more of the company's stock, said company spokeswoman Christine Cassiano. But that change provided a five-year window for compliance. Sharer has two more years to buy Amgen shares.
The AFL-CIO said a labor-sponsored shareholder resolution would request that Amgen's board boost the amount of stock executives are required to hold.
The labor group said it singled out Sempra Energy's pay program because the company, the parent of Southern California Gas, was an active issuer of stock options to executives but did not formally expense option costs on its income statement.
U.S. accounting rule makers have ordered large companies to expense options beginning with financial statements issued after June 15. A number of major U.S. firms began doing so last year, ahead of the deadline.
Sempra spokesman Doug Kline said the company would start expensing options as required by the new rules. He said the firm still was studying the various methods under which it could count option expenses.
Kline also said Sempra believed that CEO Stephen L. Baum's 2004 pay was reasonable, given that the company's earnings rose 38% last year and given the performance of Sempra shares over the last five years. The stock was unchanged at $40.23 on the New York Stock Exchange on Monday.
The AFL-CIO valued Baum's 2004 pay package, including options, at nearly $5 million.
Other companies whose compensation programs were singled out by the AFL-CIO on Monday were Coca-Cola Co., Dynegy Inc., Sprint Corp. and Wal-Mart Stores Inc.