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This excerpt taken from the PHM DEF 14A filed Apr 7, 2009. PERFORMANCE-BASED OPTIONS PROPOSAL Resolved: That the shareholders of Pulte Homes, Inc. (the “Company”) request that the Compensation Committee of the Board of Directors adopt a policy that a significant portion of future stock option grants to senior executives shall be performance-based. Performance-based options are defined as follows: (1) indexed options, in which the exercise price is linked to an industry or well-defined peer group index; (2) premium-priced stock options, in which the exercise price is set above the market price on the grant date; or (3) performance-vesting options, which vest when a performance target is met. Supporting Statement: As long-term shareholders of the Company, we support executive compensation policies and practices that provide challenging performance objectives and serve to motivate executives to enhance long-term corporate value. We believe that standard fixed-price stock option grants can and often do provide levels of compensation well beyond those merited, by reflecting stock market value increases, not performance superior to the company’s peer group.
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Our shareholder proposal advocates performance-based stock options in the form of indexed, premium-priced or performance-vesting stock options. With indexed options, the option exercise price moves with an appropriate peer group index so as to provide compensation value only to the extent that the company’s stock price performance is superior to the companies in the peer group utilized. Premium-priced options entail the setting of an option exercise price above the exercise price used for standard fixed-priced options so as to provide value for stock price performance that exceeds the premium option price. Performance-vesting options encourage strong corporate performance by conditioning the vesting of granted options on the achievement of demanding stock and/or operational performance measures. Our shareholder proposal requests that the Company’s Compensation Committee utilize one or more varieties of performance-based stock options in constructing the long-term equity portion of the senior executives’ compensation plan. The use of performance-based options, to the extent they represent a significant portion of the total options granted to senior executives, will help place a strong emphasis on rewarding superior corporate performance and the achievement of demanding performance goals. Leading investors and market observers, such as Warren Buffet and Alan Greenspan, have criticized the use of fixed-price options on the grounds that they all to [sic] often reward mediocre or poor performance. The Conference Board’s Commission on Public Trust and Private Enterprise in 2002 looked at the issue of executive compensation and endorsed the use of performance-based options to help restore public confidence in the markets and U.S. corporations. At present, the Company does not employ performance-based stock options as defined in this proposal, so shareholders cannot be assured that only superior performance is being rewarded. Performance-based options can be an important component of a compensation plan designed to focus senior management on accomplishing long-term corporate strategic goals and superior long-term corporate performance. We urge your support for this important executive compensation reform. This excerpt taken from the PHM DEF 14A filed Apr 7, 2008. PERFORMANCE-BASED
OPTIONS PROPOSAL
Resolved: That the shareholders of Pulte Homes, Inc.
(the “Company”) request that the Compensation
Committee of the Board of Directors adopt a policy that a
significant portion of future stock option grants to senior
executives shall be performance-based. Performance-based options
are defined as follows: (1) indexed options, in which the
exercise price is linked to an industry or well-defined peer
group index; (2) premium-priced stock options, in which the
exercise price is set above the market price on the grant date;
or (3) performance-vesting options, which vest when a
performance target is met.
Supporting Statement: As long-term shareholders of
the Company, we support executive compensation policies and
practices that provide challenging performance objectives and
serve to motivate executives to enhance long-term corporate
value. We believe that standard fixed-price stock option grants
can and often do provide levels of compensation well beyond
those merited, by reflecting stock market value increases, not
performance superior to the company’s peer group.
Our shareholder proposal advocates performance-based stock
options in the form of indexed, premium-priced or
performance-vesting stock options. With indexed options, the
option exercise price moves with an appropriate peer group index
so as to provide compensation value only to the extent that the
company’s stock price performance is superior to the
companies in the peer group utilized. Premium-priced options
entail the setting of an option exercise price above the
exercise price used for standard fixed-priced options so as to
provide value for stock price performance that exceeds the
premium option price. Performance-vesting options encourage
strong corporate performance by conditioning the vesting of
granted options on the achievement of demanding stock
and/or
operational performance measures.
Our shareholder proposal requests that the Company’s
Compensation Committee utilize one or more varieties of
performance-based stock options in constructing the long-term
equity portion of the senior executives’ compensation plan.
The use of performance-based options, to the extent they
represent a significant portion of the total options granted to
senior executives, will help place a strong emphasis on
rewarding superior corporate performance and the achievement of
demanding performance goals.
Leading investors and market observers, such as Warren Buffet
and Alan Greenspan, have criticized the use of fixed-price
options on the grounds that they all to [sic] often reward
mediocre or poor performance. The Conference Board’s
Commission on Public Trust and Private Enterprise in 2002 looked
at the issue of executive compensation and endorsed the use of
performance-based options to help restore public confidence in
the markets and U.S. corporations.
At present, the Company does not employ performance-based stock
options as defined in this proposal, so shareholders cannot be
assured that only superior performance is being rewarded.
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Performance-based options can be an important component of a
compensation plan designed to focus senior management on
accomplishing long-term corporate strategic goals and superior
long-term corporate performance. We urge your support for this
important executive compensation reform.
The Board of Directors recommends a vote
“AGAINST” this proposal for the following
reasons:
The Board of Directors of the Company believes that
performance-based compensation is an essential component of
executive compensation. As described in the Compensation
Discussion and Analysis section of this Proxy Statement, the
Company’s Compensation Committee (the
“Committee”) is committed to pay-for-performance;
accordingly, a significant portion of the Company’s
executive compensation is performance-based. The Board also
believes that compensation should be competitive with our direct
competitors in the homebuilding industry, as well as other
companies of similar size and complexity, and should be designed
to align the short-term and long-term interests of employees
with those of shareholders.
The Board believes that the Committee, which is comprised solely
of directors who are “independent” as defined by the
NYSE listing standards, is the governing body best suited to
formulate executive compensation principles and practices that
reflect the interests of shareholders, while retaining the
ability to address the specific needs of the Company’s
business. Executive compensation practices are influenced by a
wide range of complex factors, including changes in strategic
goals, regulatory developments and the competitive compensation
practices of other companies. As a result, it is important that
the Committee retain the flexibility to select incentives that
balance these influences and that the Committee have the ability
to respond quickly to changes that may otherwise limit the
Company’s ability to attract, motivate and retain key
talent.
The Board feels that the Company’s current compensation
policies and programs are already performance-based, and that a
policy requiring that a significant portion of future stock
option grants to senior executives be performance-based as
described in the proposal would not provide an advantage over
those currently utilized by the Company. Specifically, the
Company’s 2004 Stock Incentive Plan provides that the
Committee may, in its discretion, grant performance-based
options. The Board believes that it is important that the
Committee retain this discretion and not be constrained by a
policy mandating that a significant portion of option grants be
performance-based. The Company’s performance-based
compensation is linked to measures that drive specific outcomes,
including both long-term and short-term incentive programs.
Moreover, fixed-price stock options already are
performance-based because the exercise price equals the market
value of the Company’s common shares on the date of the
award. Accordingly, no economic benefit is conferred on the
optionee unless the Company’s shares increase in value
subsequent to the award date. Stock options generally vest over
a period of years. These vesting periods require long-term focus
on Company performance in order for the employee to realize any
value from the exercise of stock options. We believe it
appropriate for there to be elements of equity-based
compensation in which employees are able to realize the full
benefits of positive market performance and experience the
effects of negative market performance, as do shareholders. We
believe that fixed- price stock options provide an objective
performance metric that is directly aligned with the interests
of shareholders and is an appropriate performance measure for
the Company.
Further, the majority of our significant competitors use
fixed-price options, rather than performance-based options.
Limiting the Committee’s ability to establish compensation
packages in line with those at our competitors could place us at
a competitive disadvantage in attracting,
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motivating, rewarding and retaining superior executive talent.
The Board believes that the Committee must have the flexibility
to create compensation policies appropriate to the competitive
environment in which we compete for senior executives.
The Committee has used other types of long-term incentive
vehicles and may continue to do so in the future, as permitted
under the Company’s equity incentive plan, to support
particular business strategies, retention initiatives
and/or
recruiting activities, taking into account circumstances as they
exist from time to time, including changing economic and
industry conditions, accounting requirements and tax laws,
together with evolving governance trends. However, the Board
believes that the Committee should not be constrained in
determining which types or combinations of long-term incentive
vehicles are the most appropriate and effective for a given
situation.
The Board of Directors recognizes that a significant percentage
of shareholders voted last year in favor of a similar
shareholder proposal and takes an active interest in shareholder
proposals receiving a significant percentage of the votes cast
at any annual meeting. The Board and the Committee have
carefully evaluated the proposal and considered whether it
should be implemented and for the foregoing reasons determined
not to implement the proposal.
The Board of Directors recommends a vote
“AGAINST” this proposal.
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