Score One for Dissent

Hewlett-Packard, the computer maker under investigation for using private investigators to obtain personal phone records, has satisfied shareholder concerns about disclosure of political contributions but tried to exclude a proposal that would allow dissident shareholders to run board candidates. The SEC recently declined to act on HP's request to keep the measure off the ballot, and shareholders are scheduled to vote on it at a March 14 meeting.

An HP spokesman declined to comment. In the company's proxy statement, the board of directors recommends a vote against the proposal, in part because its approval could lead to "the election of 'special interest directors' who represent the interests of the stockholders who nominated them, not the interests of all HP stockholders."

AT&T has sought guidance from the SEC about omitting from its proxy ballot a proposal to allow an advisory vote on corporate compensation practices. The SEC has not yet responded, said spokeswoman McCall Butler, who said that the company planned to keep the resolution off the ballot. Butler said the company is having dialogue with shareholders, and that a "blanket 'yes' or 'no' " vote on compensation would not provide useful feedback for the board.

Nonetheless, as the negotiations reach their peak before the annual shareholder meetings, compensation consultants and investor groups say the shift in the climate has altered the dynamic between boardrooms and shareholders.

One reason activist shareholder groups -- mainly pension funds and labor groups -- will walk into the meetings with a bit more swagger this year is that new SEC rules require companies to offer more information about pay. Such disclosures would give shareholders a better idea of the total compensation granted to senior management, and could show that $200 million packages such as the one former Home Depot chairman and chief executive Robert L. Nardelli got last month are in place at dozens of companies, some corporate governance experts said.

"Boards are realizing that they need to step up and change their standards," said Ed Durkin, director of corporate affairs for the United Brotherhood of Carpenters and Joiners. "The way people may express their anger at some of those numbers is to vote on resolutions that relate to compensation."

Rep. Barney Frank (D-Mass.), chairman of the House Committee on Financial Services, said yesterday that he will hold a hearing March 8 on strengthening the role of shareholders in setting executive compensation.

Maryland state Sens. Paul Pinsky and Richard S. Madaleno Jr. last week introduced a bill that would prohibit a company from deducting executive compensation as a business expense if it was more than 30 times the pay of its lowest-paid employee. President Bush told a group of business executives on Wall Street recently that they "need to pay attention to the executive compensation packages that you approve."

All this, investor groups say, could motivate companies to avoid public votes on controversial proposals by cutting deals with investors before the meetings.

Durkin's group has made more than 120 proposals, 72 of them on majority voting. He expects to have settled more than half by the start of proxy season, up from the 25 percent settlement rate on the issue last year.

"There's significant engagement with companies now," said Ferlauto, the AFSCME official. "Companies are realizing the disclosures that they'll be making and are meeting with shareholders early on to try to explain away the outsize compensation payments of CEOs."