Investors seek reforms of home-builder CEO pay

Already, chief executives' pay in the home building sector has declined as the housing market's fortunes have fallen. But activist investors say compensation is still too generous and not tied closely enough with company performance.

"These guys made off like bandits during boom times," said Michael Garland, director of value strategies for the CtW Investment Group, an adviser to union pension funds. "Now the market is in the tank, and shareholders have lost tens of billions, and these guys have walked away with their compensation."

Long critical of home builders' pay practices, activists are once again filing pay-related shareholder resolutions ahead of next year's annual meetings.

And this time they hope for stronger support from other investors, who may be more focused on governance matters after the bursting of the real estate market bubble wiped away billions of dollars in collective shareholder value at these companies.

"My expectation here is that there is going to be a much more focused look at the home-building industry given what's happened," said Richard Metcalf, a corporate affairs director at the Laborers' International Union of North America.

The union, which has filed 2008 resolutions calling for pay reforms and other changes at a host of home builders, has a particular interest in the sector because many of its members work in it.

So far, Metcalf said, the Laborers' Union has filed proposals calling for improved pay-for-performance practices at D.R. Horton Inc, Lennar Corp and KB Home, as well as a resolution for the disclosure of a succession plan at luxury home builder Toll Brothers, where Chairman and CEO Robert Toll owns about 18 percent of the common stock, based on filings.

The union also has introduced measures calling for Ryland Group Inc and Beazer Homes USA Inc to reveal more about their lending arms' dealings in subprime and other risky types of mortgages.

Beazer awarded its CEO a $7.1 million bonus in the fiscal year that ended in September 2006. Soon after, the company disclosed a federal probe into its mortgage business, and last month it restated financial results going back to 2004 due to accounting problems.