Allstate 2008 Annual Report Download - page 39

Item 6
Stockholder Proposal on an
Advisory Resolution to Ratify the Compensation of the
Named Executive Officers
AFSCME Employees Pension Plan, 1625 L Street, N.W., Washington, D.C. 20036, the beneficial owner of 3,813
shares of Allstate common stock as of October 3, 2008, and St. Scholastica Monastery, 1301 South Albert Pike,
Fort Smith, Arkansas 72913, the beneficial owner of 170 shares of Allstate common stock as of December 2, 2008,
intend to propose the following resolution at the Annual Meeting.
The Board of Directors does not support the adoption of this proposal and asks stockholders to consider
management’s response following the proponent’s statement. The Board recommends that stockholders vote
against this proposal.
Advisory Resolution to Ratify the Compensation of the Named Executive Officers
RESOLVED, that stockholders of The Allstate Corporation (‘‘Allstate’’) request the board of directors to adopt
a policy that provides stockholders the opportunity at each annual stockholder meeting to vote on an advisory
resolution, proposed by management, to ratify the compensation of the named executive officers (‘‘NEOs’’) set
forth in the proxy statement’s Summary Compensation Table (the ‘‘SCT’’) and the accompanying narrative
disclosure of material factors provided to understand the SCT (but not the Compensation Discussion and
Analysis). The proposal submitted to stockholders should make clear that the vote is non-binding and would not
affect any compensation paid or awarded to any NEO.
SUPPORTING STATEMENT
In our view, senior executive compensation at Allstate has not always been structured in ways that best serve
stockholders’ interests. For example, while stockholders were experiencing negative total shareholder return for
2007, former Chairman Edward Liddy received more than $20 million in reported total compensation.
We believe that existing U.S. corporate governance arrangements, including SEC rules and stock exchange
listing standards, do not provide stockholders with sufficient mechanisms for providing input to boards on senior
executive compensation. In contrast to U.S. practice, in the United Kingdom, public companies allow stockholders
to cast an advisory vote on the ‘‘directors’ remuneration report,’’ which discloses executive compensation. Such a
vote isn’t binding, but gives stockholders a clear voice that could help shape senior executive compensation. A
recent study of executive compensation in the U.K. before and after the adoption of the stockholder advisory vote
there found that CEO cash and total compensation became more sensitive to negative operating performance
after the vote’s adoption. (Sudhakar Balachandran et al., ‘‘Solving the Executive Compensation Problem through
Shareholder Votes? Evidence from the U.K.’’ (Oct. 2007).)
Currently U.S. stock exchange listing standards require stockholder approval of equity-based compensation
plans; those plans, however, set general parameters and accord the compensation committee substantial
discretion in making awards and establishing performance thresholds for a particular year. Stockholders do not
have any mechanism for providing ongoing feedback on the application of those general standards to individual
pay packages.
Similarly, performance criteria submitted for stockholder approval to allow a company to deduct
compensation in excess of $1 million are broad and do not constrain compensation committees in setting
performance targets for particular senior executives. Withholding votes from compensation committee members
who are standing for reelection is a blunt and insufficient instrument for registering dissatisfaction with the way in
which the committee has administered compensation plans and policies in the previous year.
Accordingly, we urge Allstate’s board to allow stockholders to express their opinion about senior executive
compensation by establishing an annual referendum process. The results of such a vote could provide Allstate
with useful information about stockholders’ views on the company’s senior executive compensation, as reported
each year, and would facilitate constructive dialogue between stockholders and the board.
We urge stockholders to vote for this proposal.
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Proxy Statement