Laborers Push On Corporate Accountability

On Heels of IBM Victory, Laborers’ Union Pushes Forward On Corporate Accountability

IBM Agrees to Laborers’ Proposal to Expense Stock Options; Proposals at Sempra Energy, Community Health Systems Remain on Proxies.

IBM has agreed to a shareholder proposal submitted by a Laborers’ Union pension fund to begin expensing stock options to more accurately reflect the corporation’s earnings and impact of executive compensation.

The Laborers’ Local Union and District Council Pension Fund, which holds shares in IBM, submitted the proposal which appears on the Company’s proxy report and is scheduled to be voted on at IBM’s April 26th annual meeting.

After initially opposing the fund’s proposal, on April 5, IBM agreed to begin immediately expensing options.

Our funds have been submitting these proposals because we are aware of efforts by some companies to have Congress enact legislation which would overrule the Financial Accounting Standards Board decision to require option expensing,” said Laborers’ International Union General President Terence M. O’Sullivan. “We are pleased that IBM has now joined the ranks of companies that have agreed to expense options regardless of FASB requirements. The full impact of executive compensation on a corporation is of crucial importance to our pension funds and all shareholders.”

The Laborers’ fund asserted in its shareholder proposal that the failure to expense stock options distorts earnings, promotes excessive use of options, understates the cost of executive compensation and promotes a short-term corporate strategy of boosting stock prices, rather than company value.

Expensing options is required under a new FASB rule scheduled to take effect later this year. However, many corporations and corporate associations continue to lobby Congress to reverse the new rule.

The union’s funds, among the most active in corporate governance, intend to continue efforts to immediately implement option expensing at three other corporations.

A proposal to expense options submitted by the Laborers National Pension Fund at Sempra Energy, a $9.5 billion San Diego-based operator of utilities, received a majority vote of shareholders on April 5, 2005. The Laborers’ Local Union and District Council Pension Fund has an expensing shareholder proposal pending at Chevron Texaco, a $155 billion energy and chemical corporation. And the Indiana State District Council of Laborers and Hod Carriers Pension Fund has placed a shareholder proposal to expense options on the proxy of Community Health Systems, a $3.3 billion provider of general hospital healthcare services based in Brentwood, Tennessee.