Plum Creek Timber – Say on Pay (2009)

Outcome: 39%


Shareholders urge the Board of Directors of Plum Creek (the “Company”) to adopt a policy allowing shareholders to vote on an advisory resolution at each annual shareholders meeting, proposed by Company’s management, to ratify the compensation of the named executive officers (“NEOs”) included in the proxy’s Summary Compensation Table and accompanying narrative disclosure of material factors. The proposal should make clear that the vote is non-binding and would not affect any compensation paid or awarded to any NEO.


As long-term shareholders in Plum Creek, we feel that senior executive compensation at the Company has not always been structured in ways that best serve shareholders.

As the nation’s largest landowner in many communities, we have a particular interest in protecting and promoting our brand name and image. A reputation as anything less than a good neighbor or trustworthy partner can create unnecessary obstacles to success in community after community – risking long-term shareholder value.

Earlier, our Company was branded “the Darth Vader of the State of Washington” by Republican Congressman Rod Chandler (Wall Street Journal, June 1990). Substantial Company resources and executive focus were spent overcoming that reputational damage.

A July 5th 2008 front-page article in the Washington Post, headlined: “Closed-Door Deal Could Open Land In Montana.” The article focused squarely on our Company, stating: “The deal was struck behind closed doors between Mark E. Rey, the former timber lobbyist who oversees the U.S. Department of Agriculture’s Forest Service and Natural Resources Conservation Service, and Plum Creek Timber Co., a former logging company turned real estate investment trust … local [Montana] officials were stunned and outraged at the deal.”

There is concern that the Washington Post story describes a short-term strategy that may harm long-term prospects for our Company’s shareowners.

We believe existing U.S. corporate governance arrangements, including SEC rules and stock exchange listing standards, do not allow adequate shareholder input on senior executive compensation. In contrast to U.S. practices, shareholders of U.K. public companies cast advisory votes on the “directors’ remuneration report.” While not binding, the vote gives shareholders a clear advisory voice on senior executive compensation.

Current U.S. listing standards require shareholder approval of equity-based compensation plans. However, those plans only set general parameters and accord compensation committees substantial discretion in making awards and establishing performance thresholds year-by-year. Shareholders do not have any mechanism for providing feedback on how these apply to individual pay packages. (Bebchuk & Fried, Pay Without Performance, 2004.)

Similarly, performance criteria submitted for shareholder approval to allow a company to deduct compensation in excess of $1 million are broad and do not constrain compensation committees in dealing with particular senior executives. Withholding votes from compensation committee members who stand for re-election is insufficient for registering dissatisfaction with the way committees has administered prior-year compensation plans and policies.

Therefore, we urge the Board to allow shareholders a voice on senior executive compensation by establishing an annual referendum process. Such a referendum would provide important information about whether shareholders view senior executive compensation practices, year-by-year, to be in shareholders’ best interests.

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