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This excerpt taken from the PNC DEF 14A filed Mar 19, 2009. SUPPORTING STATEMENT
Equity-based compensation is an important component of the senior executive compensation program at our Company. According to the Company’s 2008 proxy statement, equity-based awards, including stock and stock option awards, accounted for between 51% and 75% of the total compensation for the NEOs during fiscal 2007. Of the $40.4 million in compensation earned by the five NEOs, $24.5 million, or 61%, came from stock awards and stock options.
Requiring senior executives to hold a significant portion of the shares acquired through the Company’s compensation plans for at least two years after their termination of employment would tie their economic interests to the long-term success of the Company, and motivate them to focus on the Company’s long-term business objectives and better align their interests with that of shareholders. The absence of such a requirement may enable these executives to unduly focus their decisions and actions towards generating short-term financial results at the expense of the Company’s long-term success. The current financial crisis has made it imperative for companies to reconsider and reshape executive compensation policies and practices to discourage excessive risk-taking and promote long-term, sustainable value creation.
Several well-regarded business organizations support “hold past retirement” policies. The Aspen Principles, endorsed by the U.S. Chamber of Commerce, Business Roundtable and the Council of Institutional Investors, recommend that “senior executives hold a significant portion of their equity-based compensation for a period beyond their tenure.”
Further, a 2002 report by The Conference Board endorsed a holding requirement, stating that the long-term focus promoted thereby “may help prevent companies from artificially propping up stock prices over the short-term to cash out options and making other potentially negative short-term decisions.”
Our company requires the NEOs to hold PNC stock with a market value of up to five times their respective base salaries and does not have a post-employment retention requirement. A post-employment retention requirement that is linked to the amount of compensation and the total shares issued to NEOs will ensure they share in both the upside and downside risk of their actions at the Company. We urge shareholders to vote for this proposal.”
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