WASHINGTON, D.C. – The Teamsters Union joined a coalition of institutional investors that sent a letter to the compensation committee chairs of the 25 largest U.S. companies in the S&P 500 demanding full disclosure of work performed by compensation board consultants.
Institutional investors are concerned consultants that advise executive compensation boards will not be able to provide unbiased and independent advice if they also perform work for the company's management.
"This is a basic case of common sense," said C. Thomas Keegel, Teamsters General Secretary-Treasurer. "How can compensation board consultants responsibly perform their duties if they are also working for the very executives for which they are determining compensation? We, as shareholders, deserve to know if this duality currently exists within the companies in which we have invested."
In the letter, investors called on the companies to:
Inform investors of the nature and extent of work being done for company management by consulting firms that also recommended executive pay packages to the board's compensation committee,
Provide information on any existing board policies to prevent or prohibit the same consulting firm from providing services to both management and the board, and
Express a willingness to adopt formal policies to prevent compensation consultants from working for both management and the board.
The investors drew parallels to past concerns regarding audit firms receiving compensation for providing consulting work for the same corporation, a practice that came under scrutiny in 2000 and was later directly addressed as part of the corporate governance Sarbanes-Oxley reforms in the wake of Enron and other corporate scandals.
"The concerns that institutional investors have regarding compensation consultant independence are analogous to those raised in recent years regarding auditor independence," the letter said. "The value of auditor independence is clear, particularly when measured against the accounting scandals at companies where an accountant's role as auditor conflicted with its often far more lucrative role as consultant."
Founded in 1903, the Teamsters Union represents more than 1.4 million hardworking men and women in the United States and Canada.
