New York, NY, Mar. 25--After months of prodding from shareholder activists, General Electric Co. and Home Depot Inc. appear to have quietly addressed their Kenneth Langone-related problems.
Following Langone's high-profile exit last fall from the board of the New York Stock Exchange amid a flap over former NYSE Chairman Dick Grasso's eye-popping pay package, GE quietly revealed in its annual proxy statement this month that Langone has stepped down from its own compensation committee, although he remains on the board.
Likewise, Home Depot told a shareholder activist in a March 12 letter that it has formally agreed to end all business ties with Langone, its co-founder and lead director. The Atlanta home improvement giant also specifically vowed that it won't pursue any further business dealings with Invemed Associates LLC - the New York brokerage firm that Langone heads - as long as Langone is on its board.
The recipient of that letter, the investment arm of the American Federation of Labor and Congress of Industrial Organizations, was the same corporate-governance watchdog that hounded GE about Langone for months. Pleased by the response from both companies, the AFL-CIO said it accordingly has dropped its shareholder proxy proposal that would require Home Depot's lead director to be independent, as well as its proposal that the members of GE's compensation committee be independent.
"This is to acknowledge when companies agree to take steps in the right direction, or make efforts to satisfy shareholder concerns," said Brandon Rees, an analyst at the AFL-CIO's Office of Investment. "But ideally, we would like every company to have a lead director who is independent."
Langone didn't respond to a request for comment.
Home Depot spokesman Jerry Shields said that his company hasn't had dealings with Invemed, other than board-related expenses, since April 2001. But Home Depot's pledge is "a forward-looking promise, and that's what we were seeking," Rees said.
Langone took his leave from GE's executive pay committee - formally known as the "management development and compensation committee" - in February, the company said.
"It was by mutual agreement," said GE spokesman Gary Sheffer at the conglomerate's Fairfield, Conn., headquarters. "He did not want this to be an issue for the company - in other words, a distraction to GE."
The AFL-CIO had noted in its proxy that GE used brokerage services from Langone's Invemed Associates until 2002. GE's board said the company already has responded with corporate governance measures.
Langone remains a "valuable" board member, Sheffer said, and serves on GE's audit and nominating and corporate governance committees. Sam Nunn, a retired partner of Atlanta law firm King & Spalding, replaced Langone on the compensation committee, according to GE's proxy.
Having withdrawn its proposal to GE shareholders, the AFL-CIO won't present it at the company's shareholder meeting, slated for April 28, and shareholder votes on it won't be required to be tabulated. Home Depot's proxy statement, which hasn't been released yet, won't include the AFL-CIO's proposal, Rees said.
