Investor reaches for reins on executive pay

Some of Robert Morse's ideas are small: Paint a baseball so it's easier to read a curve. Make a four-colored deck of cards so his wife doesn't confuse the spades and clubs.

Some are bigger: Cap the pay of American corporate executives at $500,000 a year.

The 92-year-old inventor, poet and shareholder activist considers such a level of compensation "far above that needed to enjoy an elegant lifestyle," according to his proposal at Merck's annual meeting last month.

"How many planes can you fly on? How many pairs of shoes can you wear?" asks the retired jeweler, who keeps a model of a gadfly in his home office. There he tracks and trades stocks online, managing his retirement money while maintaining enough stock to submit shareholder proposals at dozens of corporations.

Part nest egg and part soapbox, those shares have given Morse the right to put his proposal before investors at Merck & Co., Ford Motor Co., Coca-Cola Co., Exxon Mobil Corp. and others over the last decade. He hasn't won one yet _ but he's not giving up.

A half-million dollar pay cap makes sense, he says, particularly compared to the presidential salary.

"He only gets $400,000 and he has to control the whole world," Morse says. "A CEO just worries about one company."

Morse's plan won just 4 percent of shareholder votes at Merck _ a standard reception for his proposals _ but a network of like-minded investors is having more success with a gentler request: Give shareholders an advisory vote on executive pay.

Analysts say the economic slowdown and new standards of disclosure for executive compensation have contributed to the sudden popularity of the "say-on-pay" advisory vote since 2006, when only half a dozen companies considered the measure.

Paul Hodgson of The Corporate Library, an independent governance research firm, said the state of the economy has made many investors anxious about the escalating pay for top executives. Meanwhile, new regulations require publicly traded companies to more fully disclose the value of stock options and benefits in compensation packages, giving investors a clearer picture of just how much CEOs are getting.

"Five years ago the markets were doing great and now they're not. But CEO pay has kept going up," Hodgson said.

About one-quarter of the nearly 100 companies facing "say-on-pay" proposals this season have already held votes, and the plans average more than 40 percent investor support, according to RiskMetrics Group, which tracks trends in corporate governance.

The first such vote this year passed at Apple Inc., where CEO Steve Jobs has amassed more than 5.4 million Apple shares _ worth more than $616 million _ along with his annual salary of just $1. A proposal was approved at Lexmark International Inc. and garnered considerable backing at other companies _ 43 percent at Goldman Sachs Group Inc., 46 percent at Boeing Co. and 48 percent at Merck & Co.

Last Monday, insurance company Aflac Inc. put its top executives' compensation to an advisory vote _ a first for a U.S. company, according to Aflac spokeswoman Laura Kane. By a 93 percent vote, investors approved CEO Dan Amos's $14.8 million compensation in 2007, a year when the company's shares reached all-time highs.

Other boards, though, have overwhelmingly opposed the say-on-pay proposals. They cite industry competition for a scarce pool of qualified executives and suggest alternative avenues for shareholder input, such as writing letters to board members.

The proposals for annual votes on executives' pay for the prior year are nonbinding, but investors who clearly express their will can bring about change. Many companies have adopted limits on severance packages and reformed their board elections in recent years after successful shareholder proposals on those issues.

"Boards can sit back and ignore these proposals," said Hodgson. "But it would be a brave board that says, 'You may think that, but we're not going to do anything.'"

Verizon Communications Inc., Blockbuster Inc. and Par Pharmaceutical Co. will give investors a nonbinding vote on executive pay beginning next year, after a majority of their shareholders supported the idea in 2007.

For Morse, who has been trying to beat back executive pay for a decade, the idea of an advisory vote is promising but he won't stop pushing for hard-and-fast limits.

"I'm fighting greed," Morse says. "They don't earn their money. I worked for my money."

He finds the idea of corporate extravagance intolerable, he says, after experiencing poverty firsthand during the Depression.

"I didn't even have a nickel to buy soup in school. That's how poor I was."

Most of the explosion in executive pay has come since the 1980s, said John Landry, an editor at the Harvard Business Review who wrote his dissertation on the history of executive pay.

CEOs now make more than 400 times the salary of the average worker, compared with 40 times as much in 1980, according to The Institute for Policy Studies, a liberal research group.

Morse says corporations need to be reminded of how little it takes to live comfortably _ but he's realistic about what one man can do.

"I'm going to keep going," he said. "Things will change but not in the next year or two. The public doesn't respond fast enough."

Will he see CEO pay level off before his age enters three figures?

"I hope so," Morse said with a laugh. "But I'm making no prediction on that."

(This version CORRECTS dateline to Moorestown, N.J. sted Morristown, N.J.)