Shareholders want say in chief executives' pay

Wall Street's high-rolling chief executives live a lifestyle that would make Hollywood movie stars jealous -- penthouse apartments, private jets and paychecks tipping $60 million a year.

Corporate boards in recent years have rubber-stamped generous bonus packages for an elite set of executives, a reflection of a go-go stock market and soaring profits. Now, as the credit crisis roils Wall Street and decimates stock prices, shareholders are demanding a voice.

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Fund managers and individual investors alike are campaigning for a "say on pay" rule giving shareholders a vote on executive compensation at major corporations, especially America's biggest banks. This is the latest salvo in the battle against Wall Street's exorbitance, and this time it appears shareholders might stand a chance.

Timothy Smith, a senior vice president at Boston-based Walden Asset Management, nearly pulled off a "say on pay" resolution at Goldman Sachs Group's annual meeting Thursday. The proposal garnered 43 percent of the vote, despite strong recommendations for its rejection from CEO Lloyd Blankfein and the investment bank's board.

"To us, it appears that Wall Street has a severe rash, to which its boards, made up of corporate members, respond 'you scratch my back, and I will scratch yours,'" said Smith, whose firm owns 65,000 shares of Goldman Sachs.

Indeed, most boards these days are hand-picked by management and typically include executives from other companies. Goldman's board has former top executives from Sara Lee, Medtronic, Colgate-Palmolive and Allstate.

They might find the latest push on compensation difficult to ignore. Shareholders who voted in favor of "say on pay" represented a wide swath of big institutional investors, like mutual funds, foundations and pensions.

Smith complimented Blankfein for navigating Goldman Sachs for the most part clear of the credit crisis, which has cost global banks nearly $200 billion in write-downs and led to the implosion of Bear Stearns. However, he said -- "as owners of this company" -- shareholders should have a seat at the board.

Blankfein, who took home about $54 million in 2007, rejected the proposal, saying he didn't want anyone "less sophisticated and have less understanding" of the financial industry making decisions on pay. Goldman's top five executives were paid about $250 million total last year, including cash bonuses, stock awards and other compensation, according to the company's proxy statement.

"This would create a feedback loop. It would create a cloud, a constraint, a limitation on decisions that have been at the heart of what a board has done," he said at the company's annual meeting.

He likely hasn't seen the last of Smith, and CEOs across every industry are facing similar challenges as companies hold their annual meetings throughout April and May.

While PTSC is not in as large as some of these companies, they (the shareholders) seem to want the same kinds of things we are asking for here. I particularly like the idea of the shareholders having a seat at the the board. Fat chance of that happening at PTSC unless you agree to wearing earmuffs and a blinfold at the meetings. lol