Incentive Award Lock-Up Period

2010 – Bank of New York Mellon Corporation

 

 

RESOLVED:  The Stockholders of The Bank of New York Mellon Corporation (the “Company”) request that the Board of Directors (the “Board”) adopt a policy to require a five year lock-up period for senior executives’ equity incentive awards.  During this lock-up period, senior executives may redeem or sell one-fifth of their equity incentive awards in each of the five years.  This lock-up period will begin to run after all performance requirements to earn the awards have been met and will continue after the executive is no longer employed.

     

This policy will apply in addition to any other equity holding requirements that our Board has established for senior executives.  This policy will not apply to existing contracts but should cover new contracts and extensions or replacements of existing contracts. 

 

Supporting Statement: We believe the impact of the recent financial crisis was exacerbated by skewed incentive compensation programs that spurred executives of financial companies to assume excessive risk for short-term illusory gains.  In our view, these flawed compensation practices enabled executives to cash out hundreds of millions of dollars in compensation when the going was good and not forfeit any money when their companies imploded. 

 

In June 2009, Treasury Secretary Timothy Geithner urged that “Companies should seek to pay top executives in ways that are tightly aligned with the long-term value and soundness of the firm.”  Goldman Sachs CEO Lloyd Blankfein has proposed paying executives in deferred equity and requiring them to hold much of it until retirement and banning guaranteed multi-year bonuses. 

     

A 2009 study, “America’s Bailout Barons,” by the Institute for Policy Studies found that CEOs at 20 banks that received Troubled Asset Relief Program (“TARP”) funds were paid 37% more in 2008 than the average pay for CEOs of the S&P 500 companies.  Indeed, our Company was a TARP participant.  Now that our Company has repaid the TARP funds, we are concerned that our Company may unduly reward executives for short-term performance.

 

Our proposal seeks to link executive pay with long-term performance by ensuring an appropriate holding period for equity incentive awards.  This compensation approach has been promoted by Harvard Law School Professor Lucian Bebchuk and UC Berkeley School of Law Professor Jesse Fried, authors of “Pay Without Performance: The Unfulfilled Promise of Executive Compensation.”  “When an executive’s options or shares vest, one-fifth of them could become unblocked, and the executive would subsequently be free to cash them out, in each of the subsequent five years,” they wrote in a June 16, 2009 op-ed in The Wall Street Journal. 

 

We recognize that our Company has adopted stockholding requirements for certain executives.  Our proposal enhances these requirements by requiring senior executives to hold their equity incentive awards over a suitable period commensurate with long-term performance even after they have departed from the Company.

 

We urge you to vote FOR this resolution.