Shareholders in KB Home rejected a labor union proposal at their annual meeting Thursday morning that would have tied executive pay to performance. But they did approve a measure to limit severance payments, even though managers recommended they vote against it.

The Laborers’ International Union of North America, which has about 500,000 members, backed a measure to tie senior executives’ pay to performance and set pay targets based on an average for similar companies.

After the measure was rejected, a handful of the union’s members, some wearing pink pig suits, protested outside of KB’s headquarters on Wilshire Boulevard.

The proposal that was approved called for the company’s board to seek shareholder approval for all severance packages that provide benefits exceeding 2.99 times the executive’s base pay including bonuses or what are commonly known as “golden parachutes.”

KB asked stockholders to vote against both measures, saying they would impair the company’s ability to gain and retain talent.

The homebuilder did not provide the vote counts, saying it will release the details in its 10 Q filing in about a week.

KB’s Chief Executive, Jeff Mezger, received $24.4 million in pay for 2007, despite the company’s stock losing 56 percent of its value over the year. However, it was Mezger’s first full year on the job as the company’s chief executive.

The company said it paid Mezger for improving the balance sheet, reducing the Los Angeles homebuilder’s debt by more than 25 percent, cutting KB Home’s workforce by nearly 40 percent and for completing the sale of its French homebuilding unit.

Shares in KB Home closed up 1.8 percent to $28.51 but lost 1.3 percent in after-market trading Thursday to $28.15.