Powerful persuader

Organizations:

Catholic Knights president and chief executive officer Daniel Steininger, a vocal critic of excessive CEO pay, has found a new way to call attention to his favorite issue. This year, Steininger plans to take on publicly held companies that are outsourcing jobs overseas to reduce labor costs, but which are still not lowering the salaries of upper management.

"Isn’t it interesting a CEO ships jobs off shore and pays no priceω" Steininger said. "Why does the pain always begin with the other employees rather than the CEOω"

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Steininger recently took his complaints to New York, where he spoke at the Reuters Technology, Media and Telecommunications Summit.

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Five years ago, Milwaukee-based Catholic Knights formed The Catholic Funds to provide investments that advocate for Catholic values.

Today, the Catholic Funds includes the Catholic Equity Fund and the Catholic Money Market Fund. The Catholic Equity Fund has stock in all of the companies in the S&P 500, except for five that manufacture drugs or equipment used in abortions or own health care facilities that provide abortions. Those companies are: Pfizer Inc.; Wyeth; HCA Inc.; Tenet Healthcare Corp.; and Health Management Associates Inc.

"It’s just an index fund," said Steininger, chairman of the board of The Catholic Funds. "You get the performance of the market."

The Catholic Funds has about $31.5 million in assets and about 1,000 investors.

The Catholic Funds puts pressure on the companies it owns stock in to treat their employees fairly by providing livable wages and quality working conditions. The fund managers file resolutions and participate in shareholder meetings to raise those issues with the companies.

Now Steininger wants to persuade companies whose stock is owned by The Catholic Funds to reduce the pay of their top executives before sending more jobs overseas to countries such as China and India. Thousands of American jobs have been outsourced overseas in recent years, particularly in the manufacturing sector. Many manufacturers say they have no choice but to outsource the work because they cannot afford to pay higher wages to U.S. laborers and compete with other firms that outsource their work at a fraction of the labor cost.

If companies want to send work overseas to save money, they should also look for ways to reduce costs for management salaries, Steininger said.

"We understand there are times you have to ship jobs off shore," he said. "But before you do, we insist that the CEO and the top lieutenants take pay cuts."

Steininger said he is not sure which firms will be targeted by the outsourcing resolutions.

Catholic Funds also plans to co-sponsor resolutions with other activist funds asking companies with overseas operations to pay their overseas employees fair wages and provide them with acceptable working conditions.

"It’s very easy to take advantage of people in (Third World) countries, because they are so desperate for work," said Steininger, who saw some of that desperation when he served in the Peace Corps in 1968 through 1970 in East Africa.

Steininger’s biggest criticism is of companies that pay their CEOs more than 100 times the pay of the average employee in the company. The Catholic Funds has asked those companies for a shareholder vote on the CEO’s compensation. If CEOs receive stock options, the Catholic Funds has asked for stock options to be given to other employees as well.

According to a study by Towers Perrin in 2000, CEOs of 365 of the largest publicly held U.S. companies earned $13.1 million, on average, about 531 times what their average hourly employee was paid.

"Why is (the CEO) getting this much moneyω" Steininger said. "Our position is this has become a greed fest."

Companies could simply ignore individuals who object to the way they do business. However, they are more likely to pay attention to stockholders, Steininger said.

Catholic Funds has received media attention by bringing issues such as excessive CEO pay to light. The companies owned by The Catholic Funds try to avoid that media attention and therefore try to appease The Catholic Funds.

"They take us very seriously," Steininger said.

The Catholic Funds have filed resolutions with several companies to limit their CEO’s pay to 100 times the pay of their average worker. Resolutions filed last year with two of those companies, Delta Air Lines Inc., and El Paso Corp., were later withdrawn because Delta replaced its CEO with a lower paid executive and El Paso Corp. pledged to monitor the ratio between the salaries of its CEO and average employees.

"It’s OK if (the CEO) gets paid more, but the wealth should be more evenly distributed," Steininger said.

The Catholic Funds is not just trying to promote Catholic values, Steininger said. Catholic Knights believes those values will improve the performance of the companies owned by the fund.

"We’re not trying to hurt American businesses," Steininger said. "We want them to succeed. We genuinely believe they will be better companies if they adopt what we recommend. These are good business practices."

Companies that move jobs overseas and pay their CEOs and upper managers far more than the average employee hurt the morale of their employees, which leads to lower quality work, Steininger said. These companies should treat their employees better, he said, because the business depends on those employees.

"The workers make the company successful," Steininger said. "The CEOs forget that."

The Catholic Funds has grown with the help of word of mouth and public relations, Steininger said. Several media outlets, including the New York Times, have done news stories about the Milwaukee-based venture.

Many Catholics are responding to the opportunity to invest their money and promote Catholic values in American businesses at the same time, Steininger said.

"This is getting a tremendous amount of attention," he said. "We are talking to Catholic universities, hospitals and religious orders. There is a lot of money in Catholic institutions waiting to be invested in our fund. How else can they bring their values to the board rooms of Americaω"

Catholic Knights is a nonprofit, Catholic fraternal benefit society. Last year, Catholic Knights had about $100 million in revenues. Steininger’s salary is $245,000, which is only seven times the average salary at the organization, according to a Catholic Knights spokesman.

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