At yesterday's annual meeting, shareholders of Lucent Technologies voted to make 75 percent of executive stock grants dependent on the company's performance. The proposal was put forward by Joanne Radke, who holds 6200 shares as a result of her husband Ken's 36 years with Lucent's predecessor companies.

Here's part of her supporting statement.  "As long-term shareholders, we support compensation policies for senior executives that provide challenging performance objectives that motivate executives to achieve long-term shareowner value. We believe that a greater reliance on performance-based equity grants is particularly warranted at Lucent.

The compensation of Lucent's senior executives appear to be completely disconnected from returns to shareholders."

There are a few issues that we can spot in the Lucent situation that bear watching across the landscape of American business in the next few years.

Consider Ms. Radke first.  She is not an investor who bought Lucent stock after careful analysis and because she thought it was a good investment. 

Ms. Radke owns stock because her husband worked for Lucent and probably used a stock purchase plan to build up a retirement portfolio.  There are millions out there like her.

These folks are not "investors" in the true sense.  They hold stock the stock of companies they or a spouse worked for.  Many of them have watched the value of their shares drop like a rock.  There was a time when Lucent's stock price stayed above $100 for months. Today it's going for $2.85.

They've also seen some buccaneers come and go as CEO.  In Lucent's case there is Richard McGinn.  Mr. McGinn was let go after barely three years on the job and extravagant claims that the company was going to grow at better than twenty percent per year.

His severance package was worth about $13 million and included some fascinating details. When McGinn was hired as CEO, shares were set aside as an incentive for good corporate performance. But when Mr. McGinn got fired, the company turned those shares into an outright grant. They were given to him. If I read it right, that means that the incentive must have been to screw up the company, lay off lots of folks, and get fired.

So we've got a bunch of retirees out there, holding stock in the companies they used to work for.  Their share prices, and therefore their net worth, is plummeting.  But they've got other reasons to be upset.

Companies are starting to hack away at health benefits for retirees, too.  The companies say they have to do that to survive.  But the retirees take it personally.  They feel like the company they gave their life to has broken the agreement they thought they had.

We're going to see lots more of this in the years ahead.  Here's why.

Companies have found that the retirement plans they promised years ago are devastatingly hard to finance.  So they're increasingly looking for a way out.

More retirees own stock than ever before.  That stock is a big part of their net worth.

There are more and more retirees every year.  Folks who retired years ago are living longer. Folks who've taken early retirements swell the pool.  And the giant river of Baby Boom retirees is about to begin flowing.

Now consider one more thing.  We're talking about Baby Boomers here.  This is the generation that took over the Dean's office at college and made protests an every day occurrence.

It's going to be the Activist Generation, coming to a shareholders' meeting near you.

References and Resources

You'll find Lucent shareholder resolutions and board recommendations on the portion of the Lucent site devoted to investor relations.
http://www.lucent.com/investor/annual/05/proxy/prop.html

Institutional Shareholder Services is a well-known provider of proxy voting and corporate governance services. The company provides global proxy services and database and research tools for institutional investors. Part of their work involves analyzing proxies.
http://www.issproxy.com/index.jsp