This excerpt taken from the PNC DEF 14A filed Mar 19, 2009.
STATEMENT BY THE BOARD OF DIRECTORS IN OPPOSITION TO THE PROPOSAL
After careful consideration, the Board of Directors unanimously recommends that you vote against the AFL-CIO Reserve Funds proposal. Our Board of Directors and independent Personnel and Compensation Committee believe strongly that stock ownership by senior executives helps align the interests of the executives with the long-term interests of our shareholders and sends a positive message regarding managements commitment to long-term value. However, this belief is already reflected in our compensation practices and policies, and as discussed below, the proponents proposal is not in the best interests of our shareholders.
First, as discussed in our Compensation Discussion and Analysis section, our Personnel and Compensation Committee utilizes equity-based compensation as a substantial component of overall executive compensation, which provides strong incentives for executives to improve PNCs long-term performance and deliver value to our shareholders. This practice helps the Personnel and Compensation Committee fulfill its goal of substantially linking executive compensation with corporate performance and shareholder value over the long-term.
To further this goal, our Personnel and Compensation Committee has established an executive officer ownership policy that maintains the alignment of the financial interests of our executive officers with those of our shareholders. Under this policy, most of our executive officers, including all of the named executive officers, are required to meet and maintain minimum stock ownership guidelines. These guidelines, which are expressed in terms of the value of the equity holdings as a multiple of each officers base salary, are:
Newly hired or promoted executives have up to four years to meet their stock ownership requirements. Each year, the Personnel and Compensation Committee confirms whether our executive officers meet these guidelines. At the committees last review of these guidelines during the fourth quarter of 2008, all executive officers were in compliance with the guidelines. Due to recent sharp declines in our stock price, one executive officer is no longer in compliance, as of the record date of this meeting. All five named executive officers are in compliance with the guidelines as of the annual meeting record date. The committee will monitor ongoing compliance with these guidelines, as necessary or advisable, in light of continued stock price volatility.
Unlike the AFL-CIO Reserve Funds proposal, which would set stock ownership requirements only by requiring the retention of stock acquired through the Companys equity compensation plans (and therefore would provide no assurances regarding actual ownership), our stock ownership policy requires a specific and substantial level of ownership of common stock. We believe that this level is set at a point that appropriately balances the need to align executive and stockholders interest with the need of executives to engage in legitimate and appropriate financial planning. And as much as the proponents policy could result in inappropriately low levels of stock ownership, the policy could result in excessive levels of stock ownership. To the extent that the proponents 75% rule resulted in excessive stock ownership relative to an executives total wealth (a result that becomes more likely the greater the tenure and experience of the executive), the Personnel and Compensation Committee could find itself unable to utilize the desired level of equity compensation relative to cash compensation without jeopardizing its ability to retain executives. Moreover, we would be at a competitive disadvantage relative to our peers who are able to better balance equity and cash compensation and retain the types of long-term, experienced officers that our company needs in order to succeed in a highly challenging and competitive environment.