As a minor sharehodler in IBM, thanks to the employee stock purchase program I participated in, I get a lovely printed annual report along with the proxy for the shareholder’s meeting.

So I took the time to read through the proxy statement and I was particularly interested in some of the shareholder propositions.

Proposition 5. The Stockholders request that the Board of directors adopt a policy that the compensation of senior executives will be determined in the future without regard to any “pension income” from a defined benefit pension plan that the accounting rules may require IBM to treaat as an additino to its reported income and earnings per share. The argument against states that the pension plan has done poorly the past three years and that is also figured into the executive compensation, Therefore this is a fair and equitable practice that should be continued.My comment: Executives should not recieve bonuses based on income from the pension plan. Shouldn’t income from the pension plan go back into the pension plan? Aren’t there employees depending on the funding of the plan?

Proposition 6. Okay this is longer so let me paraphrase: Stock options for executives should be shown on the income statement. The argument against is that IBM currently follows all accepted rules of reporting and that the figures are available in relevent footnotes.My Comment: Salaries paid are an expense to any company. It only makes sense that stock options should also be treated as an expense. Why shouldn’t they? Why do they need to be hidden in a footnote at the bottom of a page?

What caught my eye is that the board of directors was recommending a vote against most of these propostions because the executive staff was undertaking "significant risk" and therefore deserve to maintain the status quo. Significant risk? I think they need to define risk. I don’t think it means the same to them as it does to their employees.

Now before I continue let me make clear that I have no inside information on IBM apart from the annual report and my work experience as a former employee.  I’m about to make a lot of generalizations based on observations of corporate America which may, or may not apply to IBM specifically.

So when I say "under the table," just what do I mean?  Well salaries and stock compensation are fairly well known, even if they aren’t easily dicernable in the annual report.  What I’m talking about is the provision many companies have to let their executive staff take out personal loans from the company.  This is the kind of thing that doesn’t get on the annual report.  Nor is it reported when the board decides to just "forgive" the outstanding debt.  In other words, money for nothing.  Perhaps the most fantastic example of this came out of the former Tyco executives public divorce.

I’m not anti-capitalist.  I’m anti leech.  If a person inveests significant portions of their own wealth into a company to ensure success, then good for them.  They deserve to reap some benefit if things work out.  

Leeches are interesting creatures.  They attach themselves to a host and suck blood till their gorged.  Then they drop off, only to do it again the next time their in need of gorging.

My view of these corporate executives is much the same.  How many executives of IBM have invested personal funds into the company?  How many of them have gone to IBM’s bankers and said, "If this doesn’t work you can take my home?"  I have no proof, but I feel safe in saying that none of them have done this.

They aren’t risking anything.  Sure they may miss a significant portion of compensation if their business doesn’t do well, but when your guaranteed salary is already well on it’s way to seven figures what does it matter?

What disturbs me beyond their compenstation for this "significant risk" they’ve undertaken, is what they get if they’re fired.  "Golden Parachute" is not a new term around here.  These executives get massive bonuses when they are fired!

I’m sorry, but that isn’t significant or even close to risk of any kind. Even Warren Buffet, one of America’s star executives, has commented that the compensation is out of line.

What happens to the employees who are doing the work, delivering the goods?  Well if things are going well they may get a raise to just keep up with inflation.  If things are going poorly they may be let go to save money, meanwhile an executive gets a bonus for saving a million dollars by laying off a chunk of the workforce.

I’m concerned that corporate America has buffered itself so far from the workforce that they have lost touch with the roots of their business. The people who work nine to five and longer, day in and day out, are the ones who keep business moving. What’s going to happen when the people who do the work of business decide to change the rules? We’ve seen it before in Ameria with the once powerful labor unions. Corporate America should be careful they don’t wake the sleeping giant.