To United Technologies Corporation (UTC) Shareholders:
We urge you to vote FOR Item 5 on the Company's proxy card asking the Board of Directors to incorporate human capital-related measures such as employee training, morale, and safety into the standards used for awarding performance-based executive compensation.
Support Item 5 for the following reasons:
For these reasons, we ask
you to Vote FOR Item 5
This is an International Association of Machinists and Aerospace Workers (IAM) member-sponsored proposal. This resolution is supported by the IAM. For information, please contact David White at 301-967-3437.
UTC's Annual Meeting for Shareholders will be held on Friday, April 27, 2001.
Item 5 will be voted on by UTC's shareholders for the Company's upcoming Annual Meeting for Shareholders. This proposal asks the Board of Directors to incorporate measures related to training, morale and workplace safety (in addition to traditional financial benchmarks) in awarding performance-based compensation to UTC executives.
Currently, performance-based pay for UTC executives is linked to the achievement of certain financial targets such as share price appreciation, total shareholder return, and return on equity. These factors are where the “rubber meets the road” in judging executive performance and they must play a central role in defining performance. But these measures are limited in that they reflect the company's success in utilizing its employees, taking advantage of the skills of its workforce that were developed in the past. Unfortunately, these measures may have little to say to shareholders with regard to what management is doing to build the foundations for future success.
The past business cycle taught many companies a cautionary lesson about
downsizing. Some found that management focused too narrowly on financial
criteria, making draconian cuts to their workforce that went far beyond
what was necessary. These companies then were left scratching their heads
when productivity plunged, when once-loyal customers, frustrated by deteriorating
quality or inferior service brought their business elsewhere, and when
profits failed to materialize. The Wall Street Journal reports that researchers
are now confirming this not-so-surprising conclusion – “downsizing often
hurt companies more than it helped” (2/21/01).
With the rapid pace of change in today's “new” economy, companies and their employees are being challenged as never before, both to apply their skills in new ways, and to make investments in developing new skills that will serve as the source of competitive advantage in the future. Indeed in remarks last spring to the Council on Foreign Relations, UTC CEO George David observed, “Never has there been a greater requirement for changes in employees' skill sets and knowledge bases.”
By taking the simple step of broadening the definition of “performance” for the purposes of performance-based executive pay to include human-capital measures, this proposal, if adopted, would help to create and institutionalize forward-looking incentives to invest in the development of the workforce which is so critical to sustained, long-term shareholder value. It does this by ensuring that compensation criteria appropriately reward managers for the manner in which they develop, deploy, and protect this most crucial of assets – UTC's employees.
UTC Shareholders: Please vote FOR Item 5
This is an International Association of Machinists
and Aerospace Workers (IAM) member-sponsored proposal.
This resolution is supported by the IAM.
For information, please contact David White
at 301-967-3437.