For 2005, Lennar President and CEO Stuart A. Miller received a bonus of $21.5 million, and a restricted stock award valued at $6.3 million in addition to his $1 million salary. The size of the bonus was directly linked to the company's performance: because the company met prescribed earnings per share, return on capital and customer satisfaction ratings, Miller was entitled to the pre-set maximum of one percent of pre-tax earnings. This is the same percentage that was achieved in fiscal 2004. Since the company's pre-tax earnings grew from $1.5 billion in fiscal 2004 to $2.2 billion in fiscal 2005, Miller's bonus eligibility increased from $15.2 million in 2004 to $21.8 million in 2005. (Several company employees agreed with the company to reduce their bonus payments in order to increase amounts available under the bonus pool; Miller agreed to reduce his bonus by $250,000.)

Miller's 2005 option award of 200,000 shares (representing 12.6 percent of all options granted for the year), would be worth approximately $3 million with 5% annual appreciation over a 10-year term. The value of his outstanding options, however, is much higher: at the end of FY05, Miller held 353,290 exercisable options and 846,000 unvested options in class A common stock that were then worth $12.3 million and $13.9 million, respectively.

Lennar performed well over the last several years: an investment of $100 into Lennar stock on 11/30/2000 would have grown to $410 five years later, while a similar investment in the Dow Jones Total Market Index would have only grown to $108. If the company had granted indexed based options, however, the executives would not have had the same success. The company slightly lagged behind its peers. Yet all the named executives other than Miller exercised stock options in fiscal 2005, realizing between $1.9 and $4.6 million in gains.

Pulte Homes, which also faced a performance-based options proposal from a Laborers fund, also underperformed its peers over the last five-year period. So indexed-priced options at Pulte might well have provided incentive awards tied more closely to the performance of Pulte's management rather than the industry trend. On the other hand, going forward, if Pulte's shareholder return outperformed its peers, executives holding indexed options could benefit even if the stock does not risen significantly.

In 2005 Pulte Homes granted CEO Richard J. Dugas Jr. 400,000 options with a potential value of $10 million if company stock appreciates 5 percent per year. Dugas' option award represented 9.22 percent of options granted by the company in 2005.

For 2005, Dugas received a bonus of $11 million including $6.4 million as cash and a restricted stock award valued at $4.6 million. Dugas also received $1.32 million in long-term incentive payouts in addition to his $850,000 salary. None of the company's named executives exercised stock options in fiscal 2005. In addition to substantial restricted stock holdings, at the end of 2005 Dugas held 550,000 exercisable options and 1.1 million unvested options that were worth $13.4 million and $10.4 million, respectively, at that time.

Dugas' ownership stake, however, pales when compared to that of company founder and chairman, William Pulte, who owns 42 million shares, representing a 16 percent stake in the company. Pulte has not received options from the company in the last three years, though as employee chairman he received a $5 million cash bonus and a restricted stock award valued at $4.6 million for 2005. The company reports that Pulte's holdings include 41.6 million shares that are owned by various trusts of which Pulte is a trustee, and over 300,000 shares of restricted stock that are scheduled to vest over the next three years.

The shareholder proposal -- which suggests that options with an exercise price tied to the market index ensure that executives are rewarded for out-performing the competition -- raises a number of interesting questions. Should top executives realize wealth on what was clearly not solely the result of executive talent? On the other hand, would it be reasonable to expect an executive to receive no gain in a situation where shareholders have benefited so spectacularly?

And, perhaps of most interest, what happens next? Several home construction companies have warned of high inventory, cancelled orders and disappointing sales, and the Home Construction index has fallen. Should -- as some have speculated -- the housing bubble "burst," these executives might benefit from having their options linked to how competitors are faring. Under such a model, executives could conceivable profit even if the stock price falls as long as they perform better than competitors.

Lennar noted in its statement of opposition to the proposal that under the company's 2004 stock incentive plan the company may grant performance-based options, though it wanted to maintain the flexibility to determine whether to do so. It will be interesting to see if performance-based options become more appealing should the company stock price fall.

What do shareholders think? Well, the vote at Pulte was significantly above that average vote on this proposal last year (35.6 percent). Lennar's weak 5.7 percent support is likely due in part to significant inside ownerships: directors and officers control 48.4 percent of the voting power at that company.

Meanwhile, Metcalf reports that the Laborers are involved in "on-going discussions" with a number of companies.