Responding to another CBIS-led engagement on the issue of excessive executive pay, global tech giant Cisco Systems, Inc., announced on July 28, 2010 that its board of directors agreed to offer shareholders an advisory vote on executive compensation. Shareholders were given an opportunity to provide input on the compensation of named executive officers by casting a non-binding vote at the company’s November annual meeting. The company’s decision resulted in part from a six-year-long dialogue on the issue of executive compensation with a group of SRI shareholders led by CBIS. In a July 28 press release, Cisco announced its decision, saying it “…acknowledges thoughtful dialogue with Christian Brothers Investment Services, Inc. and other shareholders following approval of a shareholder proposal in 2009.” (A CBIS-sponsored resolution asking Cisco to provide shareholders with a “say on executive pay” was approved by 51.4% of voting shareholders at the company’s annual meeting on November 12, 2009.)
CBIS participants have long expressed concern about excessive executive compensation at Cisco and at many other large publicly traded companies. Exorbitant executive pay only highlights the social strains and injustice evident in the growing disparity between the global economy’s highest- and lowest-paid workers. According to the Institute for Policy Studies, S&P 500 CEOs in 2008 earned 319 times more than the average worker, up from a ratio of approximately 40 to 1 in 1982. CBIS believes that publicly traded companies should set executive pay at reasonable and justifiable levels and share financial success broadly and fairly with employees at all levels of the organization.
As a way to stimulate progress on these issues, we believe that shareholders should be able to weigh in on whether a company’s executive compensation package is sound and reasonable, and request that the company allow shareholders an advisory vote on the board of directors’ compensation committee report. Such an advisory vote, referred to as a “say on pay,” can enhance board accountability and provide the board and management with useful information about whether shareholders view the company’s senior executive compensation to be in shareholders’ best interest.
Cisco’s decision resulted in part from a six-year-long dialogue on the issue of executive compensation with a group of SRI shareholders led by CBIS.