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The Catholic Equity Fund is one of a few money management companies that goes after what it views as excessive CEO compensation among its holdings. For example, this year's proxy for Alcoa includes a Catholic Fund proposal calling for a review of Alcoa executives' pay:

ITEM 3 – SHAREHOLDER PROPOSALS

ITEM 3(a) – SHAREHOLDER PROPOSAL RELATING TO PAY DISPARITY

The Catholic Funds, 1100 West Wells Street, Milwaukee, Wisconsin 53233, owning 2,300 shares of common stock, have notified Alcoa that they intend to present the following proposal at the annual meeting. The names, addresses and shareholdings of the proposal’s co-filers will be supplied upon oral or written request. The proposal, as submitted, reads as follows:

WHEREAS:
Commentators note that U.S. CEO compensation is excessive(1), an“occasion of sin” tempting CEO’s to undertake self-serving ventures(2) that often degrade long-term stock performance(3). Often CEO pay is driven mainly by what other companies pay. As a result, “bosses’ pay spirals upward,”(4) creating a “Lake Wobegon effect” (where all children have to be above average)(5).

CEO pay once bore a reasonable relationship to the pay of the average or lowest-paid worker. Now the ratio of CEO pay to average-worker pay has skyrocketed from about 40 in 1980 to several hundred currently (6). The ratio is only 15 to 20 in Japan and Germany today(7). A huge CEO-to-worker pay gap not only degrades worker and therefore company performance but also violates common moral principles of the common good, love of neighbor, and the dignity and worth of every human being.

Alcoa appears to be part of this national problem. Business Weekagain gave Alcoa a ranking of 1 (the worst) in its 2003 study of CEO compensation versus stock performance(8). Another study shows Alcoa’s 2002 CEO compensation to be 1,358 times the pay of a minimum-wage worker(9), compared to the S&P500 median of 625 times(10).

If Alcoa has an unjustifiable gap between the pay of the CEO and the lowest paid worker, the CEO and board should, as New York Fed President William J. McDonough urged, “simply reach the conclusion that executive pay is excessive and adjust it to more reasonable and justifiable levels(11).”

RESOLVED: Shareholders request the Board’s Compensation Committee to initiate a review of our company’s executive compensation policies and to make available, upon request, a report of that review by January 1, 2005 (omitting confidential information and processed at a reasonable cost). We request the report include:

POSITION OF THE BOARD OF DIRECTORS

The Board of Directors recommends a vote “Against” the proposal.

We believe Alcoa’s compensation is established in a fair and equitable manner, and that the proposed study would not yield any relevant or meaningful data. Last year, we recommended a vote against a similar proposal. While this year’s proposed study is more limited in scope, our objection remains that such a study would not produce any meaningful information to help the Board judge whether Alcoa’s current compensation policies and pay levels for the company’s management are appropriate.

The Compensation and Benefits Committee of Alcoa’s Board of Directors, comprised entirely of independent directors, regularly reviews the company’s compensation design. In 2002, the Committee used its own independent compensation consultant to review the results of a comprehensive study of executive compensation that had been completed by management. At the completion of that study, the Board changed the company’s total cash compensation targets for executives from above the median down to the median, as compared with an expanded database of approximately 150 comparable companies. In 2003, the Board made significant changes to the company’s long-term incentive compensation design to place more executive compensation at risk and link it directly to the attainment of specific transparent financial goals. For 2004, we concluded that both salary and incentive compensation targets for the company’s executives are competitive, so both are being held firm at 2003 levels.

The Board believes that the company’s executive compensation design is competitive, fair and appropriate and helps the company attract, motivate and retain individuals who can successfully manage a complex, multinational enterprise. Alcoa’s compensation framework is designed to reward executives for performance against both financial and non-financial goals, thereby delivering superior value to its shareholders.

We are a values-based company, and we believe that all employees should be treated fairly. We work to ensure that all employees are compensated fairly in accordance with their accountabilities, the relevant regional labor market and individual performance. 

The Board of Directors therefore recommends a vote AGAINST ITEM 3(a). The proxy committee will vote your proxy against this item unless you give instructions to the contrary on the proxy.

Alcoa in 2003 paid CEO Alain Belda a combined salary and bonus of $2.5 million, up 25 percent from 2002. Also in 2003, he was granted 600,000 stock options, which the company valued at $3.3 million, according to the filing with the U.S. Securities and Exchange Commission.

Since Belda became CEO in May 1999, Alcoa's stock price has risen 52 percent on a split-adjusted basis. Over the same period, the S&P 500 has fallen 15 percent.

Catholic Equity Fund also submitted a shareholder proposal for the proxy of Cendant, asking the latter to cap its CEO pay at 100 times that of the lowest-paid worker and adjust option grants so that they are distributed proportionately among all employees:

STOCKHOLDER PROPOSAL
[PROPOSAL NO. 5]

The Catholic Equity Fund, 1100 West Wells Street, Milwaukee, Wisconsin 53233, owner of approximately 2,900 shares of the Company's common stock, has given notice of its intention to present the following resolution at the 2004 Annual Meeting. CRISTUS Health, 2600 North Loop West, Houston, Texas 77092, Congregation of the Divine Providence, P.O. Box 37345, San Antonio, Texas 78237, Providence Trust, 515 SW 24^th Street, San Antonio, Texas 78297 and Congregation of the Sisters of Charity of the Incarnate Word, P.O. Box 230969, 6510 Lawndale, Houston, Texas 77223 have indicated their intention to co-sponsor this proposal.

"WHEREAS:

U.S. CEO compensation is often excessive(1) and often tempts CEOs to undertake self-serving ventures(2) and often degrades long-term stock performance.(3) The ratio of average CEO pay to average-worker pay has skyrocketed from about 40 in 1980 to at least several hundred currently.(4)

Both Business Week and Forbes gave the Company their worst rankings in their studies of CEO compensation versus stock performance.(5) Another study shows the Company's 2002 CEO compensation to be 578 times the pay of an average U.S. worker.(6)

We believe that the system for compensating CEOs would markedly improve if companies would take three steps. First, restore a reasonable relationship to average-worker pay. Second, include company stock or options in the CEO's compensation only if the company provides that same type of compensation to all fulltime workers on a basis that would avoid increasing the pay gap. Third, link CEO compensation to meeting specific performance requirements that would mainly reflect the contributions of the CEO rather than of the work force or the economy in general.

In our opinion, a huge CEO-to-worker pay gap not only degrades worker and therefore company performance but also violates the dignity and worth of every human being that is the foundation of Catholic social teaching and common moral principles.

RESOLVED:    The shareholders urge the Board of Directors:

•

To limit the Compensation paid to the CEO in any fiscal year to no more than 100 times the average Compensation paid to the company's Non-Managerial Workers in the prior fiscal year, unless the shareholders have approved paying the CEO a greater amount;



•

In any proposal for shareholder approval, to provide that the CEO can receive more than the 100-times amount only if the company achieves one or more goals that would mainly reflect the CEO's contributions; and



•

In that proposal, to provide for grants to the CEO of stock options or other equity only if the company provides equity compensation to all fulltime employees such that they would participate proportionately in stock performance.

This proposal does not apply to compensation agreements presently in effect.

"Compensation" means salary, bonus, the grant-date present value of stock options, the grant-date present value of restricted stock, payments under long-term incentive plans, and "other annual" and "all other compensation" as those categories are defined for proxy statement purposes.

"Non-Managerial Workers" means those employees of the company worldwide whose work would put them into the categories of Blue-Collar Occupations or Service Occupations or the Sales and Administrative Support components of White-Collar Occupations as used by the Bureau of Labor Statistics in its National Compensation Surveys.

Notes:

1.

Conference Board, 9/17/02 (quoting Greenspan: "infectious greed"), Business Week 4/22/02 ("simply out of hand").

2.

Edward M. Welch, "Justice In Executive Compensation", America 5/19/03.

3.

United For a Fair Economy, "The Bigger They Come, The Harder They Fall, http://www.ufenet.org/press/2001/Bigger_They_Come.pdf.

4.

Economist.com, Executive Pay, 10/9/03

5.

http://bwnt.businessweek.com/exec_comp/2003/index.asp; http://www.forbes.com/2003/04/23/ceoland.html

6.

AFL/CIO Executive Paywatch, www.aflcio.org"

Board Of Directors' Position

The Board of Directors recommends a vote "AGAINST" the above proposal. The Board believes that adoption of this proposal would severely limit the Company's ability to attract, motivate, and retain the best leadership talent in today's competitive environment and in the future by capping the compensation that may be paid to the Chief Executive Officer. The Company must be able to offer integrated compensation programs that pay competitively and consistently with comparable companies, align executive compensation with stockholder interest, and link total compensation to Company and individual performance.

The proposal would limit the Chief Executive Officer's compensation based on an arbitrary and formalistic mathematical formula that does not take into account the complex factors and analysis that must be considered in determining the appropriate compensation of a Chief Executive Officer. Such factors and analysis considered in arriving at a compensation amount include financial and other business goals of the Company as well as individual contributions and performance. The Compensation Committee, which is composed entirely of independent, non-employee directors, recognizes its responsibility to recommend executive compensation decisions that are in the best interest of the Company and the long-term interests of the Company's stockholders. The Board, which reviews and approves such compensation recommendations and the terms of any employment agreement entered into between the Company and its executive officers, agrees that executive compensation must be carefully evaluated. In entering into the amended and restated employment agreement with the current Chief Executive Officer (described more fully in the Compensation Committee Report on Executive Compensation contained in this proxy statement), the Compensation Committee and the Board devoted significant time and effort to assess the performance of the Company's Chief Executive Officer, and considered the Company's goals and objectives, performance and relative stockholder return, the value of similar incentive awards to executive officers at comparable companies, and awards made to the Chief Executive Officer in prior years to formulating the appropriate compensation terms of the Company's Chief Executive Officer.

The Board believes that it is ultimately in our stockholders' best interest that this process not be subject to the limitations set forth in the proposed resolution. The proponent's arbitrary and formalistic pay cap proposal would restrict the Compensation Committee's role in engaging in the complex analysis necessary to determine appropriate compensation levels and remove from the Compensation Committee the flexibility to recognize significant accomplishments of an individual that may be critical to ensuring the long-term success of the Company. The proponent's restriction on granting the Chief Executive Officer equity awards would deprive the Company of needed flexibility in designing effective incentives to retain and properly incentivize the Chief Executive Officer. The Board believes that equity awards provide effective incentives to management and such awards are designed to align the interests of the Company's management and stockholders. Under the current employment agreement with the Chief Executive Officer, any award of stock options or other equity incentive award is in the discretion of the Compensation Committee. Under the previous employment agreement with the Chief Executive Officer, he had a contractual right to such awards. The Board believes that the elimination of such right in the current employment agreement demonstrates that the Board and the Company's management are continually evaluating and taking appropriate action with respect to executive compensation without the need for an arbitrary and formalistic mathematical formula to determine executive compensation levels.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
YOU VOTE "AGAINST" THIS PROPOSAL.

According to news reports, Cendant paid CEO Henry Silverman almost $23 million in 2003, including salary, bonuses and other compensation, and $14.7 million in 2002. Cendant's stock price has more than doubled over the past year; however, shares remain more than 30 percent below their value since December 1997, when Silverman became CEO.

Here is how Cendant's 2004 proxy describes the Silverman's current employment contract:

Mr. Silverman was employed by the Company pursuant to an employment agreement originally entered into as of September 30, 1991 between Mr. Silverman and HFS Incorporated and amended and restated from time to time (the "Prior Silverman Agreement"). Effective July 1, 2002, Mr. Silverman and the Company entered into an Amended and Extended Employment Agreement (the "Amended Silverman Agreement"). During 2003, the Amended Silverman Agreement was amended as described below (the "First Amendment"). Copies of the Amended Silverman Agreement, filed as an exhibit to the Company's Annual Report on Form 10-K/A on November 4, 2002, and the First Amendment, filed as an exhibit to the Company's Quarterly Report on August 7, 2003, may be viewed through the "Investor Center—Financial Data" section of the Company's Web site at www.cendant.com.

Pursuant to the Amended Silverman Agreement, Mr. Silverman serves the Company as its President and Chief Executive Officer and as the Chairman of the Board and the Chairman of the Executive Committee of the Board. The term of employment under the Amended Silverman Agreement expires on December 31, 2012, subject to earlier termination upon certain events.

The Amended Silverman Agreement provides Mr. Silverman with a base salary of $3,300,000, an increase of 3.3%, effective July 1, 2002. Mr. Silverman did not receive any base salary increase during 2003, and will not receive any increase during 2004.

Pursuant to the Amended Silverman Agreement, Mr. Silverman's bonus is 0.60% of the Company's pre-tax income as defined in the Amended Silverman Agreement, with a limit on the bonus amount equal to $100,000 per each cent of the Company's earnings per share as defined in the Amended Silverman Agreement.

The Amended Silverman Agreement provides Mr. Silverman with specified benefits and perquisites no less favorable than those provided to other senior officers of the Company and no less favorable than those provided to chief executive officers of comparable public companies, including priority business use of corporate aircraft, personal use of corporate aircraft subject to availability, and access to car service, in all cases subject to Company policy. The Amended Silverman Agreement also provides Mr. Silverman with standard corporate indemnification rights.

Prior to the First Amendment, the Amended Silverman Agreement required the Company to provide Mr. Silverman with term life insurance with a face amount of $100 million for the remainder of his life, subject to earlier termination upon certain events. During 2003, pursuant to the First Amendment, the Amended Silverman Agreement was amended in order to implement a replacement life insurance program, which meets both the requirements of the Amended Silverman Agreement and certain provisions of the Sarbanes-Oxley Act of 2002.

Although the Prior Silverman Agreement required the Company to provide Mr. Silverman with annual option grants covering two million shares of Common Stock, this provision was eliminated from the Amended Silverman Agreement. If Mr. Silverman had received the option awards in 2002 and 2003 as provided for in the Prior Silverman Agreement instead of relinquishing his right thereto under the Amended Silverman Agreement, such options would have provided Mr. Silverman with $46.1 million of value using the Black-Scholes option pricing model(1) as of December 31, 2003. The requirement in the Prior Silverman Agreement to grant Mr. Silverman two million options annually was disclosed to the Company's and its predecessor's stockholders and option grants thereunder were approved by the predecessor company's stockholders at a time when such approval was required in order to increase the number of available options. Although the Company and the Compensation Committee consider it crucial to compensate officers with equity incentives in order to align officer interests with those of stockholders, the Company and the Compensation Committee determined that Mr. Silverman's interests were already closely aligned with stockholders by virtue of his significant holdings of Common Stock and options to acquire Common Stock

Notes:

The Amended Silverman Agreement provides that if Mr. Silverman resigns his employment for Good Reason (as defined in the Amended Silverman Agreement) or if he is terminated by the Company without Cause (as defined in the Amended Silverman Agreement), he will be entitled to receive a lump sum cash payment equal to (i) the sum of his then current base salary plus target bonus, multiplied by (ii) the greater of the number of years and partial years remaining in the term of employment under the Amended Silverman Agreement and 2.99. Mr. Silverman would also receive a pro rata portion of his annual bonus in respect of the fiscal year in which such termination occurs. In addition, Mr. Silverman (and his eligible dependents) would be entitled to continued health and welfare benefits during the remaining term of employment (or a 3-year period, if longer) and the vesting of any options and restricted stock. However, the Company may remove Mr. Silverman from his position of President and/or Chief Executive Officer (but not Chairman of the Board) without triggering such termination provisions.

If Mr. Silverman's employment with the Company is terminated other than due to death or for Cause (but including a resignation for Good Reason), the Company would (i) provide him certain benefits for life, including medical and welfare benefits, office and clerical support, access to corporate aircraft on terms applicable to senior executives of the Company, access to a car and driver, appropriate security when traveling on Company business, and reimbursement of any properly documented business expenses; and (ii) maintain Mr. Silverman as an employee to provide such services as requested by any successor chief executive officer and keep himself reasonably available to the Company to render advice or to provide services for the rest of his life, for no more than 90 days per year, in return for which he would be paid $83,000 per month (the "Lifetime Consulting Services"). The Company's obligation to provide Mr. Silverman with compensation and benefits pursuant to the Lifetime Consulting Services will terminate in the event Mr. Silverman becomes unable or is unwilling to provide consulting services, or in the event Mr. Silverman is convicted of a felony or violates any restrictive covenants set forth in the Amended Silverman Agreement. In addition, the Company maintains the right to terminate the Lifetime Consulting Services and the compensation and benefits payable thereunder by providing Mr. Silverman a lump sum cash payment equal to the net present value of such compensation and benefits. Further, in the event of an actual or potential change of control of the Company, Mr. Silverman may elect to terminate the Lifetime Consulting Services and receive such lump sum cash payment.

The Amended Silverman Agreement further provides that Mr. Silverman will be made whole on an after-tax basis with respect to certain excise taxes in connection with a change of control of the Company which may, in certain cases, be imposed upon payments thereunder and under other compensation and benefit arrangements.

The Amended Silverman Agreement provides that Mr. Silverman will be restricted from engaging in certain competitive activities against the Company. Such non-competition covenants will remain in effect in no event for less than two years following his termination of employment for Cause or his resignation, and will remain in effect for so long as Mr. Silverman is receiving payments pursuant to the Lifetime Consulting Services.