No Nun Bashing at Cisco
He did have his chance yesterday, as Cisco Systems Inc. (Nasdaq: CSCO) shareholders turned down a proposal filed by the Sisters of the Holy Names of Jesus & Mary. But Chambers reportedly was gracious and even applauded a speech by Sister Grace Diaz at the shareholder meeting.
That's not what happened in a 1996 round of Nuns vs. Silicon Valley, when a religious group petitioned Cypress Semiconductor Corp. (NYSE: CY) to add women and minorities to its board. Cypress CEO T.J. Rodgers fired back with a fervent PR campaign decrying the nuns' request as "immoral," as it could prevent Cypress from having the most qualified board possible, which in turn would dilute the company's profits and its contribution to society. Rodgers wore his "nun-basher" reputation with pride, bringing up the story repeatedly in speeches for the next year or so.
In Cisco's case, several religious and investment groups led by the Sisters suggested the company produce a report revealing its lowest salaries, comparing them with executive pay packages and determining whether those packages have become "excessive."
Proposals like this rarely pass, but the real goal was to get the issue discussed among shareholders and Cisco executives, says Julie Tanner, spokeswoman for Christian Brothers Investment Services Inc., one of the shareholder groups supporting the proposal.
"Pay packages and compensation packages are excessive, and they need to be changed," Tanner says. "The resolution was not so much concerned with the [compensation] of John Chambers, but his [compensation] with respect to the other salaries in the company."
Cisco was targeted because of its thousands of layoffs, Tanner says, raising the question of why executives should be so handsomely rewarded when so many of their co-workers are getting the axe. Published reports put Chambers's compensation at a three-year average of $87 million, or 2,277 times that of the average U.S. worker, she says.
Note that the proposal didn't insist anyone's salary be lowered. "Instead of saying [Chambers's compensation] has to come in line, we're trying to focus on the bottom, to get some figures out there that are transparent," Tanner says.
Other companies receiving similar proposals from the coalition include General Electric Co. and Time Warner Inc. (NYSE: TWX). About 300 compensation-related proposals have gone before public companies in the past year, Tanner says, prompted in part by the Enron Corp. and Tyco Electronics excesses.
The opposing argument would be that lucrative salaries are a cornerstone of competition, that a company can't expect to attract the best minds without offering the best pay. But Tanner says Cisco is aware there's a problem, pointing to the fact that Chambers cut his own salary to $1 -- albeit with hefty stock options on the side.
"Someone at Cisco acknowledged there were some problems with [Chambers's] pay package, and he took a dollar. The company hasn't been hurt," Tanner says. "That was a big step."
The Sisters' proposal picked up 9 percent of the vote. SEC rules say only 3 percent is needed to put a proposal back on the ballot -- so expect Round 2 to come up in 2004.
— Craig Matsumoto, Senior Editor, Light Reading