SOCIAL CRITERIA IN EXECUTIVE COMPENSATION

Exec. Compensation to Include Social Criteria

2005 – Broadcom

WHEREAS,

Executive compensation, often deemed excessive, has become a major public as well as corporate issue. Often it is difficult to discern how, or whether, executive compensation is connected to the executives’ performance. We believe that boards should establish policies that closely align executive compensation to financial, social and environmental performance.

According to Institutional Shareholder Services Inc. (ISS), Broadcom's stock option grants do not align with the company's performance. Furthermore, the last time shareholders voted on a company option plan, the cost to shareholders was deemed excessive by ISS.

Although the company's Compensation Committee Report on Executive Compensation in the 2004 Proxy states that compensation is "designed to align and strengthen the interests of the executive officer with those of the shareholder," during fiscal years 2001 and 2002 total CEO compensation at Broadcom increased by more than 29,000 percent (due to large option grants) while total shareholder return decreased.

According to the 2004 Proxy Statement, Broadcom’s CEO's options vest on a schedule that is unchanged by the company's performance and relies only on the executive's continued employment. Because the exercise period for these options may extend for several years after the executive's influence over corporate financial performance has ended, the compensation awarded may not reflect the performance of the executive.

Industry wide effects may boost Broadcom’s stock price independent of the executives’ performance. Long-term shareholders would be served best by executive compensation plans that exclude market effects to stocks and are based on incentives that more accurately reflect management’s contribution to performance.

There are ways to better align executive compensation with performance. For example, option plans that make vesting contingent upon share price relative to industry peers, or relative to a broad market index, may help companies more closely align pay with performance. Long-term shareholders would be better served by rewards that tie individual performance to individual compensation.

Financial performance is not the only thing that concerns many shareholders. Shareholders are increasingly concerned about the impacts of the companies in which they invest on issues such as labor, environment, human rights, etc. These shareholders see a connection between corporate responsibility and long-term value.

Nearly half of Fortune 100 companies link some characteristic of social responsibility to executive pay, according to a report from the Investor Responsibility Research Center. Neither Broadcom's executive compensation guidelines nor its investor relations representatives indicate that there is a formal link between executive compensation and social performance. A recent report titled: "Corporate Social and Financial Performance: A Meta-analysis" concludes that there is a positive association between corporate social performance and corporate financial performance.

BE IT RESOLVED, that Broadcom establish and report to shareholders on executive compensation plans that more accurately link pay to the company's financial and social performance. Shareholders should be made aware of specific financial and social goals established for management as part of the company's executive compensation policy.