Author: Site Staff

The subprime lending crisis was caused in part by the executive compensation structures at banks, according to AFL-CIO officials, who say additional legislation in the fall may propose new strictures on executive pay.

In remarks to reporters, Richard Trumka, the union’s secretary-treasurer, said performance measures at financial services firms such as Washington Mutual and Citigroup did not penalize top executives for the risk they took and excluded metrics such as loan-loss reserves and expenses related to the foreclosure of real estate assets.

“When the house of cards fell, they didn’t pay for it,” Trumka said. “We did.”

The AFL-CIO said that compensation structures should not just include return on equity and revenue growth as the main units of measure. The repeal of the Glass-Steagall Act—which removed decades-old barriers to commercial and investment banking—coupled with lax board oversight of executive compensation, led to a “financial meltdown” in the markets, Trumka said.

Dan Pedrotty, director of the AFL-CIO’s office of investment, noted that the union has been in discussions with several lawmakers over an expansive shareholder bill of rights.

Although it’s hard to figure exactly what such a document would entail, it’s likely to include provisions on executive pay.

Union leaders would like a plank requiring all publicly traded companies to reveal how salaries for their top executives are set. They also want to see a rule forcing businesses to disclose the role of compensation consultants in the setting of executive pay levels.

The legislation could be unveiled in the fall, Pedrotty said.

The idea of a shareholder bill of rights is not new. In the wake of the Enron, WorldCom and Tyco scandals in 2002, Sen. Carl Levin, D-Michigan, introduced similar legislation. While the bill failed to become law, several of Levin’s ideas made it into the Sarbanes-Oxley Act.

But recently, unions have become increasingly vocal in calling for restrictions on executive pay. In some cases, they have backed legislative efforts to allow shareholders to make advisory votes on compensation structures. One so-called “say on pay” initiative, proposed by House Financial Services Committee Chairman Barney Frank, D-Massachusetts, passed the House overwhelmingly last year but has yet to be debated in the Senate.

Other lawmakers have targeted Wall Street compensation in the wake of the subprime crisis. Rep. Henry Waxman, D-California, held hearings earlier this year on the golden parachutes given to CEOs at Countrywide, Merrill Lynch and Citigroup, during which he slammed the firms’ executives for losing touch with the interests of shareholders.

Executive pay has also become a talking point on the presidential campaign trail. All three candidates have cited high compensation at the failed Bear Stearns and Countrywide as unfair, given the current pain among homeowners who suffered partly because of the firms’ lending practices.

Democratic presidential candidates Barack Obama and Hillary Rodham Clinton support say-on-pay legislation, and Obama last year introduced a bill similar to Frank’s legislation. His staffers have said say on pay would be a priority in an Obama administration. John McCain has slammed excessive CEO pay, but cautioned against government intervention in private-sector compensation.

Business groups and several Republican lawmakers have come out against say-on-pay initiatives. They argue that shareholder involvement in the compensation process would drive up costs and slow down companies.

Filed by Nicholas Rummell of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

The House of Representatives on Tuesday, April 15, approved tax legislation that would require trustees of health savings accounts to substantiate that distributions from the accounts are for health care-related expenses.

The 238-179 vote came after intense debate on the House floor in which opponents of the HSA provision—which is part of a broader tax bill, H.R. 5719—warned that such a requirement could cripple HSAs.

In a statement of policy on Monday, senior administration advisors said they would recommend that President Bush veto the measure if it is passed by Congress.

The requirement for HSA trustees, generally banks, is “unnecessary for efficient tax administration, inconsistent with the flexibility purposely afforded HSAs at their inception and could undermine efforts by employers, individuals and insurers to reduce health care costs and improve health outcomes by empowering consumers to take greater control of health care decision-making,” according to the statement of administration policy.

The veto threat comes in the wake of warnings by benefit experts that the new requirement likely would double fees banks charge HSA enrollees. The costs to upgrade administration systems to substantiate claims would be more than many banks would be willing to pay for what is now a low-margin business, and experts say some banks would withdraw from the HSA market, leaving account holders with fewer choices.

Under current law, HSA distributions can be taken tax-free if used to pay for health care-related expenses. Other withdrawals are included in enrollees’ taxable income, with an additional 10 percent penalty tax imposed. Individuals are required to report HSA distributions on Tax Form 8889, indicating their total distributions as well as the amount used to pay for health care expenses and distributions that are subject to taxes.

The HSA provision would go into effect in 2011 and would raise more than $300 million in tax revenue through 2018, according to the Joint Committee on Taxation. Some critics of the provision say the bill is a ploy by House Democrats who dislike HSAs to undermine the accounts.

It isn’t known when the Senate will take up the measure.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Tax legislation approved April 9, by the House Ways and Means Committee could significantly increase the costs of administering health savings accounts.

H.R. 5719, approved on a 23-17 vote, includes a provision that would effectively require HSA administrators—which often are banks—to put new systems in place to substantiate that HSA distributions are used to pay for health care-related expenses.

That would be a big change from the current low-overhead system, in which employees with HSAs pay their uncovered health care expenses, such as those falling under a deductible, from their accounts with a bank-issued debit card or bank-issued checks. No substantiation is required that the distributions are, in fact, used for payment of health care expenses.

HSA advocates say banks now lack such substantiation systems, which would require them to make significant investments to develop them—a cost that would be passed on to account holders or those employers that now pay HSA administrative fees.

“Because most community banks and credit unions simply do not have the resources to put such costly technology into production, they would have to buy from vendors and pass on the cost to their accountholders,” said a memorandum prepared by the HSA Coalition, an HSA advocacy group in Washington.

Under current law, funds can be withdrawn tax-free from HSAs if used to pay for health care-related expenses. Funds withdrawn for other purposes are taxed, with an additional 10 percent penalty tax imposed.

The provision is expected to generate about $308 million in additional tax revenue for the federal government over the next 10 years, according to the congressional Joint Committee on Taxation.

The bill could be taken up by the full House as soon as next week.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Suspected employee abuse of leave taken under the Family and Medical Leave Act is the No. 1 FMLA-related concern for employers, according to a survey.

Forty-two percent of the human resource professionals surveyed said the potential for or suspicion of abuse by employees causes “extreme difficulty” in administering intermittent FMLA leave. Among other top concerns cited, 38 percent reported inadequate notification prior to an absence and 28 percent reported difficulties tracking intermittent leave.

A total of 450 human resource professionals participated in the survey, which was conducted in February and March by WorldatWork, a Scottsdale, Arizona-based human resource association. The survey was conducted in response to the U.S. Department of Labor’s proposed changes to the FMLA regulations, which are expected to ease many administrative problems employers have faced in trying to comply with the 1993 law.

The FMLA requires employers to provide up to 12 weeks of unpaid, job-protected leave in the year after the birth or adoption of a child; to care for a sick child, parent or spouse; or when an employee has a serious illness.

Survey respondents overwhelmingly support most of the DOL’s proposed FMLA changes.

Among the regulatory changes garnering the most support were: 72 percent of respondents strongly agree with requiring workers to notify employers in advance of taking non-emergency, foreseeable leaves; 61 percent strongly agree with requiring annual medical certification from employees when conditions last more than one year; and 60 percent strongly agree with requiring a fitness-for-duty certificate after return from intermittent leave to jobs that could endanger the employee or others, or that the worker may be unable to perform.

A full copy of the “FMLA Practices and Perspectives” survey will be available April 14 at www.worldatwork.org/research.

Filed by Sally Roberts of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

If ever there was a question about boards holding executives accountable for performance, this year’s early proxy filings should put those doubts to rest.

Most chief executives and chief financial officers saw their cash compensation decrease last year, but executives at top performing companies raked in substantially higher cash bonuses, according to an analysis of 2008 proxies by compensation consultant Steven Hall & Partners.

Among the 522 companies that have filed proxies this year, the median cash compensation paid to CEOs was $1.23 million, a 4.3 percent decrease from the previous year. CFOs, meanwhile, took home total cash compensation of $550,000, 1.4 percent less than they were paid last year.

But a closer look at the top-performing companies shows that their CEOs and CFOs were appropriately rewarded for a job well done, said Steven Hall, managing director and founder of the consulting firm.

Companies whose performance put them in the top quartile realized growth of 77 percent in their median net income in 2007, as measured by Steven Hall. CEOs at these companies were paid a median cash bonus of $663,286 last year, a 25 percent spike from the year before, which pushed their total compensation up 15 percent, to $1.43 million. CFOs at top quartile companies saw their cash bonuses jump by 23 percent, to $293,645, driving their total compensation up 10 percent, to $696,869.

“Boards are holding executives’ feet to the fire,” Hall said. “They are making them accountable for their results and for delivering true performance, that much is clear.”

Hall’s analysis also showed that companies that fell into the bottom quartile for performance—where net income decreased by at least 39 percent last year—paid their CEOs median cash bonuses that were 72 percent lower, while CFOs were given cash bonuses that were 52 percent less.

At companies in the bottom quartile, many executives didn’t get a bonus at all. Almost a third of the companies that Hall analyzed didn’t reward their CEOs with any cash incentive last year.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Todd Sturgill was a driver for United Parcel Service in Springdale, Arkansas. In May 2004, he joined the Seventh-day Adventist Church, which prohibits its members working from sundown Friday to sundown Saturday. During the winter, Sturgill’s religious practices conflicted with his shift, which ended when all of his packages were delivered. UPS denied his request as inconsistent with UPS operations and a collective bargaining agreement. UPS and the union discussed transferring Sturgill to a “combination job” to accommodate his religious practices. But no such jobs were available and such positions were granted based on seniority.

Sturgill’s immediate supervisor then “split” his load, moving packages to other drivers to informally accommodate Sturgill. When Sturgill was unable to complete his route before sundown on one occasion, he returned the remaining packages to the UPS center and then was terminated for abandoning his job.

Sturgill filed a lawsuit with the U.S. District Court for the Western District of Arkansas, alleging religious discrimination. A jury found that UPS failed to reasonably accommodate Sturgill, awarding him $103,722 in compensatory damages and $207,444 in punitive damages.

The U.S. Court of Appeals for the 8th Circuit held that the district court improperly instructed jurors that a reasonable accommodation “eliminates” any conflict between work and religion. Although Title VII requires employers to make “serious efforts to accommodate … it also requires accommodation by the employee.” The court affirmed compensatory damages because UPS failed to determine whether there were additional alternatives to accommodate Sturgill, but reversed the award of punitive damages. Sturgill v. United Parcel Serv. Inc., 8th Cir., No. 06-4042 (1/15/2008).

    Impact:Employers must make a serious effort to accommodate, but need not eliminate conflicts between work and religion. In all cases, an employer should examine all efforts to accommodate.

The Uniformed Services Employment and Reemployment Rights Act of 1994:The text of the act.

USERRA final rules:These regulations detail employer obligations to reinstate service members to pay and benefits level they would have received had they not been in military service.

USERRA Advisor: ThisDepartment of Labor site “helps veterans understand employee eligibility and job entitlements, employer obligations, benefits and remedies under the Act.”

Employer and employee issues under USERRA: This section of theUSERRA Advisor addresses concerns of both employers and employees.

Employer Support for the Guard and Reserve:The organization’s purpose is to “inform employers of the ever-increasing importance of the National Guard and Reserve” and “explain the necessity for and role of these forces in national defense.”

Civil rights cases and investigations involving service members and veterans: This page contains links to some of the cases the Department of Justice has filed on behalf of service members against employers under USERRA.

Reserve Officers Association “Law Review” articles:Archive of questions posed by members of the military about various aspects of USERRA, answered by reserve officers who are attorneys.

Compiled by Carroll Lachnit. To comment, e-mail editors@workforce.com. 

Event: Catalyst’s 2008 Awards Conference

When: April 9, 2008

Where: The Waldorf-Astoria, New York

What: HR executives and diversity officers come together to learn about best practices in creating a diverse culture and discuss the challenges they face. Executives from this year’s winners, Nissan and ING, provided the 574 attendees with great examples of why the business case of having a focused diversity initiative makes sense.

Day 1—Wednesday, April 9, 2008

Moving mountains: Most large companies have to overcome cultural challenges when they launch diversity initiatives, but what Nissan has been up against with its gender diversity efforts in Japan takes it to a whole new level.

In their morning presentation, executives from the Tokyo-based automaker discussed how Japan is behind the United States when it comes to women in the workforce. While women in the U.S. started joining the full-time workforce in big numbers in the 1960s and ’70s, that trend only began in Japan in the 1990s.

“We are 20 years behind the U.S.,” said Asako Hoshino, corporate vice president at Nissan. When Nissan first launched its diversity development office in 2004, there were no female supervisors at the company.

During the past four years, however, Nissan has made enormous progress. The company has implemented mandatory manager training, increased its focus on recruiting and retaining women and made ergonomic changes to many of its plants to make it easier for women to work there.

The company also has introduced the notion of work/life balance to a population of women who until recently had to choose between work and staying at home with their children, said Hitoshi Kawaguchi, senior vice president in charge of HR and the diversity development office. Parents at Nissan can take up to 2½ years off when they have a baby. The Japanese government only says that employers have to offer six months.

Since 2004, the percentage of engineering positions at Nissan held by women has jumped from 8 percent to 16 percent—a particularly significant increase given that only 7 percent of university engineering graduates were women in 2007.

Women hired into non-engineering positions increased from 50 percent in 2004 to 57 percent in 2007. Representation of women in management has increased from 2 percent, or 36 women in 2007, to 4 percent, or 101 women.

Making it personal: The high point of the one-day conference was a Q&A with Indra Nooyi, chairman and CEO of PepsiCo.

In her speech, Nooyi was frank about the challenges she faces every day managing her role as CEO and mother of two girls.

Nooyi scoffed at the concept of “work/life balance,” saying that “in the C-suite, I don’t think there is a difference between work and life.”

Nooyi described that as a CEO and a mom, she has to make choices every day.

“I don’t know that I am always a good mother, a good executive and a good wife,” she says. “There is no formula or tradeoff that makes it right.”

Her advice to the mothers in the audience? “Make sure you have the right spouse.”

Nooyi also advised working moms to create a network of family, friends and even colleagues to help out.

“I refer to this as group mothering,” she says, recalling how when her kids call to ask if they can play video games and she is in Asia, the assistants who answer the phone have a checklist of questions to ask the children, such as have they done their homework.

Employers need to realize that women have an undue burden since they are usually the caregivers in their families, Nooyi said. Sometimes companies’ efforts to be sensitive to this fact backfire, she said. For example, PepsiCo recently gave a woman a few months off to take care of a sick family member. However, Nooyi soon got a call from the two employees—both women—who had taken on this person’s responsibilities while she was out.

“They were mothers too and had too much work,” she said.

Companies need to figure out a way to fill the holes when employees step out of the workforce for a few months at a time.

“Maybe we need a small group of roving midlevel managers that can step in,” she says.
—Jessica Marquez

You might expect Yahoo to be suffering from recruiting and retention troubles these days, given all the turmoil at the Internet giant.

Uncertainty about Yahoo’s future rose dramatically this week, amid news of a Yahoo move to test Google’s search-related ad service and reports of possible AOL-Yahoo and Microsoft-News Corp.-Yahoo deals. These headlines followed an ultimatum Saturday, April 5, from Microsoft warning Yahoo to come to terms on a Microsoft acquisition within three weeks or face a possible fight for control of Yahoo’s board of directors.

But attrition has not increased at the Sunnyvale, California-based company since Microsoft’s initial offer in February, Yahoo said in late March. And the number of applicants actually has been growing—a trend that may owe in part to a new severance policy for all full-time employees in the event of an acquisition.

On the other hand, talent management at Yahoo is not exactly business as usual. It takes longer to walk candidates through concerns they have, says Carol Mahoney, Yahoo’s vice president of talent acquisition. Mahoney says it isn’t harder to convince candidates about Yahoo, but “it’s more time-consuming.”

Yahoo, a pioneer on the Internet, has weathered turbulent times over the past year, including the departure of CEO Terry Semel and slumping profits. As part of an effort to refocus the company, Yahoo cut 1,000 jobs this year.

Another major source of upheaval was Microsoft’s unsolicited bid to acquire Yahoo for $44.6 billion in cash and stock. Yahoo rejected the bid as too low, touting plans to make gains in the online ad market and become the “starting point” for the greatest number of consumers. The company has 1,000 job openings as it pursues its new strategy, Mahoney says.

Microsoft turned up the heat Saturday in a letter signed by Steve Ballmer, CEO of the Redmond, Washington-based software titan. “If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board,” Ballmer wrote. He also implied that Microsoft would lower its price.

Yahoo’s board on Monday again rejected Microsoft’s offer, but said it was open to a deal with Microsoft under the right conditions.

Then came word of the test with Google, which raises questions about broader collaboration between Yahoo and its Internet rival. Adding to the mix were reports about a possible AOL-Yahoo tie-up and the prospect of a partnership between media giant News Corp. and Microsoft to acquire Yahoo.

It is unclear whether a merger with Microsoft would curb Yahoo’s famed culture of fun—or lead to more layoffs. Yahoo had 14,300 employees at the end of 2007. Microsoft had 78,565 employees as of last June.

The prospect of going to work for “Microhoo” could hurt Yahoo’s recruiting, observers say.

“I hope a merger doesn’t change Yahoo’s corporate culture,” says an MBA student who recently applied for a Yahoo summer internship and asked not to be identified. “Both are good names to have on your résumé, but I would rather work for a company like Yahoo than for Microsoft, because of its culture.”

New severance plans that would be triggered by a change in control at the company help Yahoo’s recruiting, Mahoney says. Benefits under the plans include four to 24 months of severance pay and health coverage. The new policy is “an anxiety reducer” for anyone nervous about joining an acquisition target, Mahoney says.

Many companies have change-in-control agreements for executives. Yahoo’s approach stands out because it covers all full-time employees.

—Gina Ruiz and Ed Frauenheim

MSNBC.com has career goals. The news Web site announced on Thursday, April 10, an agreement with Monster Worldwide Inc. that makes the online job site the exclusive career services provider for MSNBC.com.

Under the agreement, which includes MSNBC.com and Todayshow.com, Monster will be the exclusive provider of career tools and services for MSNBC-affiliated properties. Through a co-branded site, job seekers will be able to access Monster’s search and match capabilities and view job openings nationwide, as well as conduct regional job searches on the site’s local news section. Features include a résumé builder, salary information center and portfolio of job search management tools.

The agreement is a boon for Monster, which will have direct access to MSNBC.com’s 35 million unique visitors.

With an increasing number of companies entering the online job search industry, and chief rival Careerbuilder.com inking a deal with popular social networking site Facebook, Monster is struggling to maintain its dominance in the once-sparse online job services industry.

Rumors of a potential buyout have been circulating since Monster chief executive Sal Iannuzzi joined the company a year ago. Iannuzzi, previously CEO of Symbol Technologies, sold that company to Motorola in September 2006. After bringing Symbol CFO Timothy Yates to Monster in June, rumors grew that Iannuzzi might be preparing Monster for a similar sale.

But Monster has yet to announce any such intentions. In January, the company acquired San Francisco-based Affinity Labs for $61 million, expanding its career guide, search, trade news and social networking offerings. The company also launched its “Your Calling Is Calling” campaign, aimed at marketing Monster as a means of finding a “dream job” and not just a source for job listings.

Shares of Monster fell as much as 2% to $23 and were down 0.7% intraday. Shares have shed 27.5% so far this year.

Filed by Kira Bindrim of Crain’s New York Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.