"Washington Mutual Inc"
Washington Mutual Inc Meeting type: Annual General Meeting Date: 19 April 2006 Country: US Index: NYSE Sector: Savings Institutions, Federally Chartered Item Description TMF vote Mgmt vote 1.1 Elect Kerry K. Killinger WITHHOLD FOR Comment: The roles of Chairman and CEO are combined, which Triodos Bank does not consider to be best practice 1.2 Elect Thomas C. Leppert FOR FOR 1.3 Elect Charles M. Lilis WITHHOLD FOR Comment: Although we consider the nominee to be independent, we have concerns regarding the likely impact of his external positions on the amount of amount of time he can consequently devote to company business. In addition to two full-time positions, he sits on the boards of four other companies. 1.4 Elect Michael K. Murphy WITHHOLD FOR Comment: Mr Murphy is not considered by Triodos to be sufficiently independent as he has been on the board for 21 years. In assessing Mr Murphy's independence we note that the company considered his position until November 2005 as a trustee of the WM Group of Funds, which are advised by the company. Mr Murphy received undisclosed trustee fees in the past three years for this service. The company considers this relationship to be immaterial because funds ‘are not affiliated with the company’ and the amount of fees paid to the company by the Funds ‘was substantially less that 2% of the Funds' total group managed assets. Triodos Bank regards the fact that the funds employ Washington Mutual as an advisor as more important than the ratio of management fee to size of assets managed. We also consider the fact that the WM Group of Funds is the company's largest mutual fund holder, with nearly 3% of outstanding shares, as a factor relevant to Mr Murphy's independence and we therefore withhold support for this proposal. 1.5 Elect Orin C. Smith FOR FOR 1.6 Elect Regina Montoya FOR FOR 2 Company proposal to ratify the appointment of Deloitte & Touche LLP ABSTAIN FOR as the Company’s independent auditors for 2006 Comment: The level of unacceptable non audit fees ($619,000) were greater than 6% of audit and audit related fees ($10,074,000) during the year under review. Non-audit fees over a three year basis were more than 42% of audit and audit related fees. 3 To approve the Washington Mutual Inc amended and restated 2003 OPPOSE FOR Equity Incentive Plan Comment: The company is seeking renewal and extension of its 2003 Equity Incentive Plan. The company is requesting that shareholders authorise another 65m shares under the amended Plan in order to continue its executive compensation policies and comply with Section 162(m) of the Internal Revenue Code, which requires shareholder approval of compensation schemes. The proposal also includes a number of amendments to the 2003 Plan, including new share counting rules which we support: (1) awards other than stock options and SARs will count for two shares against stated dilution limits, (2) shares which have been awarded to executives, but, for a variety of reasons, are not paid out, will not be reissued. However, we have concerns that increases to the limits of non-performance based restricted share awards (from 4.35m to 10m shares), and individual limits (from 2m to 7m shares) may lead to excessive levels of compensation. Triodos Bank considers that the intention behind 162(m) is to provide shareholders with a mechanism to ensure that executive pay is adequately performance-based and to address other governance concerns. We have concerns about the wide area of discretion over the performance conditions and performance periods attached to awards under the Plan. We also have concerns about the ability of directors to administer their own equity compensation schemes under the plan. We therefore oppose this proposal. 4 Management proposal: To approve the Washington Mutual Inc OPPOSE FOR Executive Incentive Compensation Plan Comment: Shareholder approval of the proposed Plan will allow the company to continue to award annual bonuses with full tax deductibility under Section 162(m) of the Internal Revenue Code. We consider that the rationale of Section 162(m) is to promote the principle of performance-related pay. The Plan contains a maximum award that can be made to individual participants in any single year of 0.5% of net income, which would have been $17.2m given the company's net income for FY 2005. We have concerns that there is a statement with the effect that the company may make annual bonus awards under another Plan, given the approval of the board of directors. The Plan also indicates that, subject to the maximum award limit, the actual bonus amount awarded by the Human Resources Committee may be determined ‘in its sole discretion’ and may not be contingent upon the achievement of performance targets. Triodos Bank considers that all awards be contingent upon the meeting of pre-established performance targets. We therefore oppose. 5 Management proposal: To approve the Company proposal to amend FOR FOR the Washington Mutual, Inc. Articles of Incorporation (as amended) to declassify the Board of Directors and establish annual elections for all Company directors commencing with the 2007 annual meeting, rather than the current staggered three-year terms 6 Shareholder proposal: Shareholder proposal relating to disclosure of FOR OPPOSE the Company’s political contributions Comment: The proponent requests that the company provide a semi- annual report disclosing its: (1) policies and procedures for political contributions (both direct and indirect) made with corporate funds; and (2) monetary and non-monetary contributions to political candidates, political parties, political committees and other political entities. The proponents also request that persons who participated in the decision-making process be disclosed. This is necessary, in the proponents' view, as executives are free to use the company’s assets for political objectives that may not be shared by and be inimical to the interests of shareholders. The directors recommend voting against this proposal, as they believe that the company complies with the disclosure required under federal, state and local law and the information is publicly available. In addition, they argue, the company's political contributions have been insignificant (the proponents state that the company donated at least $56,000 over the last election cycle), and the cost of producing such a report may exceed the total contributed by the company. Triodos Bank notes that the directors' response provides no reference to where shareholders can view this information. The company’s most recent SEC annual 10-K filing does not include this information, and therefore as a matter of transparency, we consider that all information concerning political donations made by the company should be easily accessible and therefore support the proposal.