* For an explanation of the different approaches used by the AFL-CIO and the U.S. Securities and Exchange Commission to calculate total compensation, click here.

Turbocharged Pensions for CEO While Workers Fret Over Retirement Insecurity

Deere & Co. workers and pensioners have good reason to fret over their retirement. Deere expects to earn 8.3 percent on its pension plan investments in fiscal 2009, but the worst stock market decline since 1929 makes that highly unlikely, jeopardizing the company’s $683 million pension surplus.[1] Overall, the nation’s pension funds lost roughly $1 trillion in assets by the summer of 2008.[2] 

In September 2008, 5,000 pensioners filed a class-action lawsuit against the Moline, Ill.-based company for reneging on promised retiree health care benefits.[3] In addition, the U.S. Department of Labor is supporting a class-action lawsuit by Deere’s employees and retirees, alleging they were charged “unreasonable” fees on their 401(k) retirement plan investments.[4]

But CEO Robert Lane’s retirement income is secure: The value of his total pension benefits increased $5.5 million in fiscal 2008 to $22.5 million—some $1.6 million annually.[5] Lane and other senior executives participate in not one but three different pension plans.[6] The increase in Lane’s pension benefits vastly exceeds the median $415,00 increase in 2008 for CEOs of a peer group of companies.[7] The company also contributed $15,500 to Lane’s 401(k) retirement plan—the maximum permitted under tax law in the fiscal year ended Oct. 31, 2008.[8] Additionally, Lane earned $77,827 through the non-qualified deferred compensation plan at interest rates ranging from 7 percent to 9.5 percent, or 2 percent above the prevailing prime rate.[9] Lane has accumulated $3.1 million through the deferred compensation plan.[10]

Deere’s shareholders did not fare so well. Investors lost about 50 percent in 2008, far worse than the Standard & Poor's 500 index and Deere’s competitors. The Corporate Library, a Portland, Maine-based corporate governance rating firm, noted “very high concern” about Lane’s compensation package because of the disconnect between his pay and the company performance.[11]

In its Feb. 13 report on Deere, RiskMetrics Group, the influential proxy advisory firm, wrote: “Providing above-market interest rates without regard to company performance during the executive’s tenure undermines the goal of linking pay to performance.”[12] RiskMetrics recommended shareholders withhold votes against three Deere directors and support a non-binding vote on the CEO’s pay package at the company’s Feb. 25 annual meeting.[13] The proposal garnered 44.3 percent support.