AFSCME, WaMu and the Withhold Campaign

AFSME has launched a withhold campaign against Washington Mutual and the directors on the Human Resources Committee because of their decision to exclude "extraordinary charges" in determining bonuses and other compensation paid to executive officers.  As the letter from AFSME to shareholders notes:

• According to company disclosures, the Human Resources Committee approved the exclusion of extraordinary charges -- the 2007 fallout from WaMu's exposure to the sub-prime crisis -- from the performance calculations for the 2007 cash bonus and restricted stock awards.  Likewise, the performance measures to be sued to evaluate executives' performance for 2008 bonuses will be calculated without factoring in sub-prime losses. 

This type of decision is almost entirely immune from challenge under state law, as Disney more than demonstrates.  Moreover, it shows that officers can do well when the stock price goes up and when it goes down.  Finally, while a withhold campaign allows shareholders to send a message, it provides shareholders with little real authority to obtain changes in managerial behavior.  Directors wanting to retain their sinecure have a greater incentive to act in the best interests of management.  What is needed is greater shareholder authority to nominate replacement directors.  Access in a word.