Union Protests 'Gross-Up' Payments

http://www.chron.com/disp/story.mpl/ap/fn/5447824.html

By JUDITH BURNS
© 2008 The Associated Press

WASHINGTON — Union pension plan activists aim to raise a new executive compensation issue at corporate annual meetings this year: so-called "gross-ups" to cover income taxes on payouts.

The American Federation of State, County and Municipal Employees wants to put the matter to a vote by shareholders at a half-dozen companies this year: American Express Co., Clear Channel Communications Inc., CVS Caremark Corp., Nabors Industries Ltd., Northrop Grumman Corp. and Textron Inc.

Gross-up payments reimburse senior executives for taxes that they owe on company-provided perks and other benefits. Richard Ferlauto, the union's director of corporate governance and pension investment, said the practice is fairly common and is "an abuse of the shareholders' wallet."

"In America, they say the only thing certain is death and taxes," Ferlauto told Dow Jones Newswires. "Well, not if you're a CEO."

The union's new push calls for targeted companies to adopt policies specifying that top executives won't receive any tax gross-up payments that aren't provided to other managers.

Ferlauto said the labor union believes chief executives shouldn't be able to avoid paying taxes and stick ordinary shareholders with the bill, a practice he called "abhorrent to investors."

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