Title: Brethren Benefit Trust, Boston Common celebrate Aflac decision March 2, 2007 Church of the Brethren News Service Cheryl Brumbaugh-Cayford, News Director 800-323-8039 ext. 260 -- cobnews@brethren.org
BRETHREN BENEFIT TRUST, BOSTON COMMON ASSET MANAGEMENT CELEBRATE AFLAC DECISION
(March 2, 2007) Elgin, IL -- It was a quack heard 'round the business world.
On Feb. 14, Aflac Incorporated, the insurance giant famous for using a duck in its television commercials, announced that its board had approved a resolution making it the first major US company that will give shareholders an advisory vote on the compensation it pays its executives.
It was Brethren Benefit Trust's shares as an Aflac investor and advocacy work by Boston Common Asset Management that helped prompt Aflac into agreeing to give its shareholders such a vote.
"This is a landmark decision pertaining to an issue of justice," said Nevin Dulabaum, director of Communications and interim director of Socially Responsible Investing for Brethren Benefit Trust. "It is common to think of unfair wages being paid in developing countries, but one does not have to look beyond the US border to find salary and benefits inequities that rise to the obscene."
In 1962, chief executive officers earned, on average, 24 times that of the average hourly worker, according to an Economic Policy Institute study. In 2005, the ratio of CEOs' pay within the US to that of the average worker had skyrocketed to 262 to 1.
Last October, Brethren Benefit Trust and Boston Common Asset Management co-signed a letter with the 275-member Interfaith Center on Corporate Responsibility (ICCR) that was sent to about 150 large firms. The letter asked for shareholders to be given a "say on pay," that is, the opportunity to cast advisory votes on their respective company's executive compensation report.
"We believe that there are real and significant concerns about excessive executive compensation practices that call for investors to become actively involved," the letter stated. "In some cases, escalating executive compensation appears to bear little relationship to company financial performance. Additionally, consultant-driven compensation recommendations that advocate for top-tier pay packages create a spiraling-up effect. These concerns are amplified against a backdrop of stagnant wage growth for the average employee."
ICCR staff subsequently identified firms that did not respond to the letter and asked its member organizations to engage in dialogue with one or more of the companies. Boston Common picked Aflac, which long had been held in the Brethren Benefit Trust portfolio. Boston Common is one of eight investment managers for Brethren Benefit Trust and works closely with the agency on a number of socially responsible investing initiatives.
Dawn Wolfe, a social researcher and shareholder advocate for Boston Common, twice attempted to contact Aflac. Receiving no response, Boston Common used the Brethren Aflac holdings to file a shareholder resolution to pressure the firm into giving shareholders a nonbinding say on pay.
"They were very surprised to receive the resolution from us," Wolfe said. "One of the reasons was that they believe they have exemplary practices when it comes to pay-for-performance, and so they believed our filing of the proposal was essentially unwarranted."
Over the span of about a dozen phone conversations and many e-mails, Boston Common learned of the metrics the insurance giant uses in establishing its executive compensation. Top Aflac officials, in turn, learned that the firm had not been targeted because they had a severe divergence between pay and performance, but because Boston Common believes shareholders have the right to express their views on executive pay.
The Aflac board ultimately decided to allow the shareholder advisory vote on executive compensation, but not until 2009 when new executive compensation disclosure rules by the Securities and Exchange Commission will be fully implemented. It became the first Fortune 500 company to make this decision.
"Aflac is the first major US company to agree to allow its shareholders to voice their opinions with regard to the firm's executive compensation," Dulabaum said. "Shareholder advocates nationwide hope that Aflac's move will prompt other companies to agree to such nonbinding votes as well."
All companies make decisions as corporate citizens as to how they treat their employees, their suppliers, and the environment. "I think it is important for shareholders to ask their firms to do more because these businesses impact our lives in so many ways," Wolfe said. "We need to hold them to high standards."
Brethren Benefit Trust manages $415 million for more than 5,000 Church of the Brethren Pension Plan and Insurance members and Brethren Foundation clients. All of these funds are invested in a socially responsible manner, with investment screens and activist initiatives guided by Church of the Brethren Annual Conference statements and guidelines.
For more information contact Jay Wittmeyer, Church of the Brethren Benefit Trust, at 800 746-1505 or jwittmeyer_bbt@brethren.org.
The Church of the Brethren is a Christian denomination committed to continuing the work of Jesus peacefully and simply, and to living out its faith in community. The denomination is based in the Anabaptist and Pietist faith traditions and is one of the three Historic Peace Churches. It celebrates its 300th anniversary in 2008. It counts about 130,000 members across the United States and Puerto Rico, and has missions and sister churches in Nigeria, Brazil, the Dominican Republic, Haiti, and India.
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For more information contact:
Cheryl Brumbaugh-Cayford Director of News Services Church of the Brethren General Board 1451 Dundee Ave., Elgin, IL 60120 800-323-8039 ext. 260 cobnews@brethren.org
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