And officials at many of those companies are digging in their heels, using stockholder-financed war chests to resist shareholder demands for more say in executive pay practices and director elections.
"Even if there's any inclination to concede the shareholder is right, these guys are not going to say it in a public forum," said Daniel J. Steininger, chairman of the Catholic Funds, a mutual fund company in Milwaukee, and author of proposals on director compensation that are under consideration at seven companies this year. "Having to meet with the shareholders when your stock is down over a four-to-five-year period is not a fun experience; they'd rather be at the dentist having a root canal."
Shareholders at Cendant, Home Depot, AT&T and other companies will consider proposals intended to rein in executive or director pay. Shareholders of companies like Pfizer and AT&T are being asked to withhold votes for executives or directors.
The new aggressiveness by some shareholders this year seems to be a result of several factors. Some appear to be taking up the issue of director elections after the demise last year of a proposal by securities regulators to allow greater shareholder participation in these matters. Another reason for activism seems to be a view that executive pay at some corporations is reducing shareholder returns, even among top performers.
Tomorrow, for example, Merrill Lynch shareholders will vote on two proposals related to executive pay at the company. One asks that the pay awarded to directors be put to a shareholder vote; the other requests that shareholders be allowed to vote, on an advisory basis only, on the executive compensation approved by Merrill's board. Last year, E. Stanley O'Neal, Merrill Lynch's chief executive, received $37 million in salary, bonus and incentive pay. Both proposals are opposed by Merrill's board, which argues that the executive pay is justified by the firm's stellar performance in 2005 — including record net earnings, up 15 percent from 2004.
Paul Hodgson, senior research associate at the Corporate Library, an institutional advisory firm in Portland, Me., said pay practices were the top focus of shareholders this year, especially as pay relates, or does not, to a company's performance.
"There is a growing number of pension funds who are recommending 'withhold' votes from compensation committee directors because they are unhappy with the job they are doing," Mr. Hodgson said. "We didn't really see very much of that last year."
Late yesterday, Denise L. Nappier, Connecticut's state treasurer, said its $23 billion Retirement Plans and Trust Funds would oppose the re-election of compensation committee members at AT&T, Wal-Mart, Home Depot, Merck, Time Warner, Verizon Communications, Safeway, BellSouth and Pfizer.
"In my view," a statement by Ms. Nappier said, "the most important issue that stands in the way of fully restoring investor trust — and eliminating the trust gap that was caused by the scandals of the Enron era — is the issue of executive compensation."
Pfizer's shareholders meet today in Lincoln, Neb., to vote on 13 directors and other matters. Two proxy advisory firms have recommended withholding votes from members of the board's compensation committee because it has awarded Hank McKinnell, the chief executive, $65 million in pay since he got the job and an $83 million pension when he retires. During that period, shares have lost 46 percent of their value.
Pfizer's directors argue that Mr. McKinnell's pay is justified, given his long stint at the company and his many contributions to it.
At the Bristol-Myers Squibb annual meeting on Tuesday, shareholders are to vote on a provision requiring that the board review all awards made to senior executives based on having met performance targets that were subsequently revised in a significant restatement of the company's results or in a large special write-down. The proposal asks that the board also be forced to recoup all bonuses or awards related to targets that were not actually achieved.
The Bristol-Myers board is recommending that shareholders reject the proposal, which received the support of 21 percent of the votes cast last year. The company, which entered into a deferred-prosecution agreement with federal prosecutors last year to avoid an indictment in an accounting fraud case, has instituted a policy to recoup cash bonuses if there is a significant restatement, the board said in making the recommendation.
Increasing stockholders' say in director elections is another hot topic at meetings this year. At most companies, directors can be elected if they receive just one vote — if they vote for themselves, for instance. Investors can only register their displeasure with a board by withholding their votes from directors under current rules at most companies.
Last week, for example, 28 percent of the votes cast at The New York Times Company's annual meeting were withheld from four of its directors. One major holder, Morgan Stanley Investment Management, said it withheld support for directors to protest the company's dual-class capital structure, which gives supervoting rights to owners of Class B stock.
Interest in achieving greater stockholder participation in director elections took hold last year when 55 shareholder proposals called for board members to gain election only if they received a majority of "yes" votes at a company's meeting. On average, 43 percent of the votes cast last year on those proposals supported them; in 13 cases, a majority of shares were voted in favor of them.
Majority-vote proposals are on the ballot this year at AMR, the parent of American Airlines; Qwest Communications International; and Allied Waste Industries, among others. Yesterday, such a proposal failed to pass at General Electric's annual meeting.
While most of the proposals under consideration at major companies ask for incremental changes in pay practices or elections, one institutional shareholder, Amalgamated Bank's LongView Funds, is going further. The investment trust that is a unit of Amalgamated, a labor-oriented bank, has submitted a proposal at CA Inc., the Long Island software company formerly known as Computer Associates, that would allow shareholders to remove two directors by a majority vote of its shares outstanding at its annual meeting. Those directors are Alfonse M. D'Amato, the former senator from New York, and Lewis D. Ranieri, former vice chairman of Salomon Brothers; the meeting has not yet been scheduled, but is likely to take place sometime in August.
CA, whose former chief executive, Sanjay Kumar, pleaded guilty to fraud and obstruction of justice on Monday, has been the subject of prosecutors' scrutiny since 2002. LongView argued that because both Mr. D'Amato and Mr. Ranieri served on CA's board before 2002, they should be removed. The company, it said, should be overseen by directors "who bear no responsibility for management" during the period when accounting fraud occurred.
Cornish F. Hitchcock, outside counsel to LongView, submitted the proposal at CA because the law in Delaware, where the company is incorporated, allows for shareholder removal of directors in such a manner. The company's bylaws, however, prevent its stockholders from calling a special meeting at which they can vote to remove directors.
"CA has made it impossible for shareholders to exercise that right other than at an annual meeting," Mr. Hitchcock said. "Also, CA does not have majority vote so any director who votes for himself is re-elected. This is a governance-challenged company."
A spokeswoman for the company said that Mr. D'Amato and Mr. Ranieri played major roles in getting CA back on track and that owners were well served by keeping them on the board. The company has written to the Securities and Exchange Commission urging that it be allowed to exclude the proposal from a vote by shareholders at the annual meeting.
Greg Taxin, chief executive of Glass, Lewis & Company, a proxy advisory firm in San Francisco, declared: "Companies have a lot of advantages in fending off unhappy shareholders, not the least of which is they can spend shareholder money on a professional, coordinated response. Even in the normal course, then, dissidents face an uphill battle in attempting to convince their fellow shareholders to oppose management or directors."