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Company May Not Omit Executive Compensation Proposal

The SEC's Division of Corporation Finance has advised Sara Lee Corp. that if certain revisions are made to a shareholder proposal relating to executive compensation, it may not be omitted from the company's proxy materials. The proposal urges the board to permit shareholders to vote on an advisory resolution to approve the company's compensation committee report, similar to the practice that is permitted in the United Kingdom.

The proposal was submitted before the SEC adopted its new Compensation Discussion and Analysis requirement. The proposal refers to the report of the Compensation and Employee Benefits Committee. The staff said that the proposal may not be omitted on the basis that it is materially misleading if the proponent, the American Federation of State, County and Municipal Employees, revises the phrase referring to the old committee report to reflect the newly required report.

In submitting the proposal, AFSCME said that it believes the senior executive compensation at Sara Lee has been excessive in recent years and that shareholders do not have sufficient influence over pay practices. AFSCME said that its proposal would provide Sara Lee with shareholder views of the company's executive compensation practices and whether they are in shareholders' best interests.

In addition to its attempt to omit the proposal as materially misleading, Sara Lee sought to omit the proposal on the basis that it relates to ordinary business matters. The staff has long permitted proposals dealing with the compensation of senior executives, but Sara Lee maintained that the proposal relates to general compensation matters. Sara Lee noted that the Compensation and Employee Benefits Committee report covers the compensation of both senior executive officers and other employees.

AFSCME responded that the proxy statement disclosure and the committee report focuses primarily on the compensation of the five most highly compensated officers. While the disclosure may apply to certain individuals other than the named executive officers, AFSCME said the discussion is incidental to the application of the policies to the named executives. The proposal does not ask the company to disclose anything other than what is already required by the SEC's rules, according to AFSCME.

Sara Lee Corp. (SEC) will be published in a forthcoming Report.