Teamsters Applaud SEC's Navistar Decision Upholding Dodd-Frank

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International Brotherhood of Teamsters

Jan 05, 2011, 04:25 ET

SEC Protects Shareholder Voice on Executive Pay

WASHINGTON, Jan. 5, 2011 /PRNewswire/ -- In an about-face yesterday, the Securities and Exchange Commission (SEC) determined that Navistar International Corp. [NYSE: NAV] must allow shareholders an opportunity to vote on a Teamsters' proposal regarding future golden parachute agreements for senior executives.

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The ruling overturned a Dec. 8 staff determination that allowed Navistar to exclude the proposal from its proxy materials. The SEC originally supported the company's argument that because the company's existing executive severance agreements would be subject to an upcoming shareholder "say on pay" vote mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, a separate vote for future agreements was not required.

"Congress made clear that the Dodd-Frank Act must not limit shareholders' right to make proposals on executive compensation, and the SEC's decision yesterday upholds that mandate," said Teamsters General President Jim Hoffa. "Allowing Navistar to misrepresent the new financial reform requirements could have set a dangerous precedent, robbing investors of their right to demand a voice on compensation windfalls for departing executives."

After the staff of the SEC's Division of Corporation Finance initially agreed with Navistar's argument for excluding the proposal, the Teamsters requested that the commission reconsider the determination, noting Congress' explicit intent that the new financial reform requirements not preclude shareholders from taking action on specific elements of executive compensation. The Teamsters argued that a shareholder vote on future executive severance agreements is entirely different from a "say on pay" vote that features only the executives' current compensation plan.

In 2009, Navistar unilaterally raised CEO Daniel Ustian's cash severance, up from two- to three-times the sum of his salary plus bonus – an estimated $7.4 million cash payout excluding other benefits that brought the total to $24.2 million. In addition, Navistar's board of directors unilaterally raised Ustian's 2010 annual incentive award to beyond what was justified by the award's set performance standards, plus gave him a discretionary $1.9 million cash bonus.

"Navistar is a company with red flags when it comes to pay," Hoffa said. "If Navistar shareholders want a say regarding their company's executive pay practices, they should have that say. The SEC's determination makes that clear."

Founded in 1903, the Teamsters Union represents 1.4 million members in the United States, Canada and Puerto Rico.

SOURCE International Brotherhood of Teamsters