 |
||||||||||||||||||||||||||||||||||||||||||||||
 |
||||||||||||||||||||||||||||||||||||||||||||||
|
Current News and Commentary. 2008: April, March, February, January, 2007: January, February, March, April, May, June, July, August, September, October, November, December. News Archives. Corporate governance defined. Disclaimers, Copyright and publisher James McRitchie's potential Conflicts of Interest as of 8/9/07. Book bites. SVNACD: What is “ethics?” What role should it play in business decisions? How do companies develop an ethical culture? How do ethical companies compete against competitors who may not be ethical, i.e., are ethical companies at a competitive disadvantage? Conversely, do ethical practices really increase shareholder value? These are a few topics to be discussed with an expert panel. 05/15/08 7:30 AM - 9:30 AM in Palo Alto. More. Evelyn Davis Speaks Her Mind (What Little There Is of It) at Ford ”Tata sells cars that are $2,500 to the lowest of the low outcasts of India,” Evelyn Davis said at the Ford AGM, adding that Jaguar represented elegance and exclusivity. “How could the board sell us out to an outfit like that who sell to people like that.” (Evelyn Davis thinks Tata sells cars to “low outcasts,” Reuters Blogs, 5/8/08) Why does this total nut-case continue to be covered by the press? I recall at one of the SEC’s roundtables leading up to the last proxy access proposals she went on with a rant about being prettier than Nell Minow. Why did the SEC pick her to represent individual shareowners? Why does the press give her so much more attention than more thoughtful individuals such as Les Greenberg or John Chevedden? Now she wants the board of Ford to resign because they sold Jaguar to Tata and because Tata sells cars to Dalits, untouchables? This latest rant tops her bad behavior at the SEC Roundtable. Crass, crass, crass. Has she no empathy, no manners, no shame?
CII Lowers Threshold for Proxy Access Proxy Access: “Companies should provide access to management proxy materials for a long-term investor orgroup of long-term investors owning in aggregate at least 3 percent of a company’s voting stock to nominate less than a majority of the directors. Eligible investors must have owned the stock for at least two years. Company proxy materials and related mailings should provide equal space and equal treatment of nominations by qualifying investors. To allow for informed voting decisions, it is essential that investors have full and accurate information about access mechanism users and their director nominees. Therefore, shareowners nominating director candidates under an access mechanism should adhere to the same SEC rules governing disclosure requirements and prohibitions on false and misleading statements that currently apply to proxy contests for board seats.” Rationale: The “3% for 2 years” formulation is fully consistent with the Council’s underlying position that large, long-term shareowners should have a reasonable degree of access to company proxy materials to nominate director candidates. (Policy adopted 4/11/08) CII's previous policy advocated a 5% threshold, with an ownership holding period of at least three years, so the recently adopted threshold is far preferable. I would prefer that shareowners have the option to adopt lower company specific thresholds. The CII thresholds may be fine for large institutional shareowners, which would still need to work in combination in most cases. However, the threshold virtually locks out nominations by smaller shareowners. ESG: Changing the Norms of Fiduciary Duties Peter Kinder's KLD Blog, Socially Responsible Investing: The Next New Thing is Already Here, presents the idea that "new institutional entrants have different motivations than traditional SRI investors. They see environmental, social and governance factors – the ESG criteria – as value drivers or inhibitors. Their concern is with performance – or more precisely, risk – not alignment of their investments with their values. They look at companies such as PetroChina and their questions aren’t just about whether doing business with Sudan’s government is right or wrong. The new entrants ask what risk doing business in Sudan poses to the company’s reputation, or whether it risks material losses from the ongoing genocidal war." "Responsible Investors" is the term favored by the United Nations Environmental Program's Finance Initiative. UNEP FI’s Principles for Responsible Investment commit their signatories to consider environmental, social and governance (ESG) factors in their investment decision-making. They now have over 160 signatories representing over US$13 trillion. Kinder speculates that climate change is one of the main drivers, as funds recognize many of their real estate assets will literally be under water in the next decade or so. "Increasing knowledge about non-financial criteria will change the norms of fiduciary duties – what a fiduciary must consider when making investment and portfolio decisions... The financial services industry is learning what SRI has known all along: Environmental, social and governance factors affect investments. So, they will also affect your fiduciary duties."
Shareholder Activism: Call for Papers Corporate Governance: An International Review (CGIR) invites paper submissions for a special issue on shareholder activism. The popular business press extensively discusses the pros and cons of shareholder activism, but scholarly thought has yet to weigh in substantively. They are interested in learning more about the antecedents and effects of shareholder activism, as well as more in-depth understanding of the various forms and features of this phenomenon. Research questions that are of particular interest include the following:
This list of topics is suggestive rather than exhaustive. They are open to a wide range of approaches from different disciplinary backgrounds (e.g., finance, management, economics, or sociology). CGIR welcomes a wide variety of theoretical perspectives and methodological approaches. Since the overarching mission of the journal is to develop a global theory of corporate governance, international comparative studies are especially welcome. Priority is given to research which spans multiple governance environments. Papers must be submitted via the CGIR website and should indicate that the manuscript is intended for this special issue. Contributors should follow the CGIR Author Guidelines. The deadline for submissions is March 31, 2009. For queries about this special issue, contact the special issue guest editors, Huimin Chung or Till Talaulicar. Troy Paredes Nominated to SEC President Bush nominated Washington University Law School professor Troy Paredes to the SEC to replace Paul Atkins, a Republican SEC commissioner who announced he will step down once his successor is in place. Paredes would serve a five-year term ending in June 2013. Paredes graduated in 1992 with a degree in economics from the University of California at Berkeley and received his law degree from Yale Law School in 1996. (Bush Nominates Law Professor Troy Paredes To SEC, DowJones, 5/6/08) In a paper entitled, On the Decision to Regulate Hedge Funds: The SEC’s Regulatory Philosophy, Style, and Mission, Paredes concludes, "To mitigate the risk of overregulation, the SEC should increasingly consider using default rules instead of mandatory rules. Defaults at least give parties a chance to opt out if the SEC goes too far. Indeed, in some cases, perhaps the SEC could exercise an even lighter touch and simply articulate best practices." His paper, Blinded by the Light: Information Overload and its Consequences for Securities Regulation, puts forth the notion that investors are suffering from information overload brought about by too much regulation. "The basic intuition of information overload is that people might make better decisions by bringing a more complex decision strategy to bear on less information than by bringing a simpler decision strategy to bear on more information." "He is skeptical about regulation,” said Peter Wallison, an American Enterprise Institute fellow and former Treasury Department general counsel, in published reports. (New SEC nominee said to be skeptical about regulation, Financial Week, 5/7/08) Just what we need, a regulator who doesn't believe in regulating. I'm already a bit skeptical. C Dir The UK’s Institute of Directors (IoD) is the subject of FT's A tough test for would-be directors (5/8/08), which describes their Chartered Director (C Dir) program. To date, 660 have achieved the title, fewer than 100 a year since its inception. “Getting my PhD was a doddle compared with this,” says Suzy Walton, an occupational psychologist, non-executive director of several organizations, former member of Tony Blair’s delivery unit in the UK cabinet office – and a newly minted C Dir. “These were the toughest set of exams I have ever done. I practically had to move into the IoD while I was preparing for them. I know all the best places to sit and work there.” "If you fail just one module of the certificate exam you can retake that module, but if you fail more than one you have to do all the formal training again and re-sit the whole suite of exams,” Walton explains. Being a C Dir formally marks you out as a senior (and therefore potentially legally liable) director, ahead of MBAs or colleagues who have no other equivalent professional training. You will not be able to plead ignorance if and when the insolvency lawyers come knocking. CorpGov Bits The Difference Makers The Millstein Center for Corporate Governance and Performance at the Yale School of Management partnered with the Mutual Fund Directors Forum to found the “Conference of Fund Leaders,” a peer network of independent mutual fund chairs and directors. The CFL will provide a unique opportunity for the independent leaders of fund boards, which hold about 1/3 of all US equity, to come together with their peers to discuss governance issues; proactively present their views on policy matters important to fund investors and independent directors, regulators and lawmakers; and promote research into the value and impact of effective, independent leadership at mutual funds. (press release, 5/5/08) RiskMetrics Group (ISS) recommends investors support a shareholder resolution filed by CalSTRS with Tulsa-based ONEOK, Inc., seeking a report on its greenhouse gas emissions. SocialFunds.com ran a nice article by Anne Moore Odell on Proxy Democracy. "Over 50 million households in the US own stocks or mutual funds, and in the great majority the proxy statements go straight to the trash (or recycling, let's hope)," said Andy Eggers. "Our tools are designed to make it easy as possible for people to be represented in this process, whether it's by quickly figuring out whether there's anything worth paying attention to at an upcoming meeting or by buying a mutual fund that has a voting record they can get behind." (Proxy Voting Made Painless, 5/7/08) Mark Latham notes, "To me the most notable one is the “Compare Fund Voting Records” section at the bottom of the page For mutual fund owners. Especially powerful is how anyone can create their own 'Focus List' of past proxy votes. The site can then rank funds on how they voted and publish that analysis to everyone who browses the site." Wow! Re upcoming Yahoo meeting, 'We are hoping to turn that into 'Independence Day' for Yahoo's shareholders,' said Eric Jackson, president of Ironfire Capital. Jackson was credited by many in playing a role in former CEO Terry Semel's resignation after the last annual meeting. Jackson's latest revolt may find two powerful allies in Yahoo's two largest shareholders, Capital Research Global Investors and Legg Mason, whose portfolio managers have both publicly expressed their disappointment with the Yahoo board's demand for $37 per share. (Yahoo board may face shareholder mutiny at annual meeting, Thomson, 5/7/08) FT asked several experts about "retention" bonuses. Lucian Bebchuk expressed what seems to be a consensus opinion. Retention bonuses are bonuses in name only. "They are no different from paying an additional fixed salary for an additional period... such value should commonly be provided in the form of performance-based pay. Consider the current plans of Royal Dutch Shell to pay retention bonuses worth about €1m (£787,000)($1.55m) to three executive directors provided that they would stay in the company until 2011...why not do so by providing them with some additional equity-based compensation or an award linked to financial performance over the next three years? (Curse of the ‘stick around’ bonus, 5/6/08) Key Vote Survey The AFL-CIO Key Votes Survey rates the voting practices of investment managers by surveying how they voted on proposals representing a worker-owner view of value. (see 2008 AFL-CIO Key Votes Survey Preliminary Scorecard) This worker-owner view emphasizes management accountability and good corporate governance. These proposals are assessed by the AFL-CIO Proxy Voting Guidelines and managers are ranked by the percentage of votes cast in accordance with the guidelines. The guidelines were developed to assist trustees in exercising their ownership rights in ways that achieve long-term value by supporting important shareholder initiatives on corporate accountability. They include board of directors proposals, corporate governance, proposals concerning employee relations, executive compensation and corporate responsibility issues. The Proxy Voting Guidelines also provide an in-depth discussion of fiduciary duties of plan trustees described under the Employee Retirement Income Security Act (ERISA). For more info, see the AFL-CIO Office of Investment page. Democratic Businesses Christian Science Monitor opinion editor Josh Burek talks with Traci Fenton of WorldBlu about democratic businesses. "Businesses that embrace a democratic style are building healthier workplaces – and better bottom lines," says Fenton. Practices most likely to become standards in the future are the following:
Last April, WorldBlu inaugurated its List of Most Democratic Workplaces. They were small to midsize firms. This year, a Fortune 500 company, DaVita Inc., is among the 2008 winners. And she expects more in the years to come. "It's time we close the gap between demanding democracy as the way we want to live – but not the way we get to work." "Organizational democracy doesn't mean that business leaders give up all control. It simply means that a company is committed to a system that empowers people – rather than just the CEO – to generate solutions and make decisions." DaVita, an El Segundo, Calif. company, is the largest independent provider of dialysis services in the United States, with more than 30,000 employees and annual sales of nearly $6 billion. The following are some of the democratic practices the firm has embraced:
Over the past five years, DaVita's stock has soared 279%, while the S&P 500 Index has returned 52%. Democracy seems to be working. Fenton concludes, "If more Fortune 500 companies operated democratically, it could mean less corporate malfeasance, happier employees, and a more stable economy. And it would allow a powerful alignment between the political system much of humanity embraces and the places we work in each day." (Even Big Companies are Embracing a Democratic Style, 5/6/08) Thanks to Les Greenberg for bringing the article to my attention. Disclosure: The publisher of CorpGov.net is a DaVita shareowner.
Know Your Fiduciary Duties The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) will sponsor "Getting It Right - Know Your Fiduciary Responsibilities," a free compliance assistance seminar, on June 10 at Embassy Suites Denver Southeast, 7525 E. Hampden Ave., Denver, Colorado. This seminar is part of EBSA's national fiduciary education campaign to increase awareness and understanding of basic responsibilities associated with operating private sector retirement plans. Apparently, one duty for employers is that they must comply with their contractual obligations to make contributions to its ERISA plan, and such a contractual obligation constitutes an "asset" of the ERISA plan. Administrators for three ERISA plans for employees of Burruss Holding Company, argued that employer contributions for the plans were not assets until they were paid. The 4th Circuit found that contributions become plan assets when they are due and payable. (Unpaid Contributions Constitutes ERISA Theft, PlanSponsor.com, 5/5/08) Chevedden Reports John Chevedden and his associates continue their relentless pursuit of shareowner rights.
The Future of Corporate Law: Symposium and Webcast - May 5th In the current issue of The Delaware Lawyer, a variety of practitioners and academics (including Lucian Bebchuk, Robert Thompson, Michael Dooley and Charles Elson) present brief appeals for reform of Delaware’s corporate statutes. Many of them, joined by professors Jennifer Hill, Brett McDonnell, Faith Kahn, Elizabeth Nowicki, and Ann Conaway, discussed their proposals for reform at the Delaware General Corporation Law for the 21st Century Symposium on May 5th at the Widener University School of Law in Wilmington. Most Americans have become "forced capitalists" as companies have moved from traditional defined benefit pensions to 401(k) plans for employees, said Vice Chancellor Leo Strine Jr., a judge in Delaware's Court of Chancery, at the lunch address. These forced capitalists invest in the market through intermediaries or money managers, Strine said. He calls it "separation of ownership from ownership." (Experts look at corporate law statute, Delawareonline.com, 5/6/08) Robert Thompson noted that "self-help" measures are important for shareholders. Delaware statutes have gaps with regard to that need. If Delaware doesn't address the need directly, it will likely lead to a patchwork of Federal provisions. Shareholders must be able to check directors when they are conflicted or entrenched. There has to be an effective way to exercise their franchise which cannot be redirected by the board. Delaware should write statutes which make Federal preemption less likely. Rick Alexander argued that five mergers were shot down by shareholders recently. The market is doing its job. Directors have a lot of information that isn't publicly available. There are legitimate differences. We're not going to maximize the economy by going with what 51% of stockholders think. What about the rights of the other 49%? Directors take their jobs very seriously. They know that failure to adopt resolutions that get a majority may cost them their jobs because ISS will recommend voting against them. Jennifer Hill said the US hasn't looked much to developments in other countries. The federalist system provides competition for corporate charters in the US. Common law may be better than civil law. However, the idea that the US operates similarly to other common law countries is a misconception. In the UK and Australia changes happens much more frequently. SOX didn't give shareholders participatory rights, only some additional protection of their rights through disclosure and liability. In Australia and the UK a raft of recent laws have strengthened rights with provisions such as "say on pay." Bainbridge and Stout argue shareholders don't want rights. However, for Hill, News Corporation's move from Adelaide was instructive. Institutional investors wanted charter provisions to render inapplicable certain Delaware laws in order to maintain Australian rights where corporate constitutions can be changed by shareholders, meetings can be convened by 100 members, and no poison pills are allowed. If you missed the live webcast, you can still view it in the archives.
SEC: Lame Duck Commission Republican SEC Commissioner Paul Atkins announced that he intends to leave the Commission once a successor is appointed and takes office. Atkins has been a leading opponent of greater protections for, and participation by, investors, such as hedge fund registration and greater proxy access. (Another commissioner checks out at the SEC, FinancialWeek, 5/5/08) It seems that Bush will now get to appoint almost all the commissioners who will serve under the next administration. CalPERS Should Remain Active Kelly Candaele, a trustee of the Los Angeles City Employees Retirement System (LACERS) makes an argument that Wall Street cannot police itself. She goes on to provide a very brief history of activism by CalPERS and some of the rationale behind it. Given "millions in campaign contributions from members of the financial services and investment industry, it is wishful thinking to expect dramatic initiatives from Barack Obama, Hillary Rodham Clinton or John McCain." "With the changes at the top, there will undoubtedly be calls for CalPERS to adopt a more subdued investment and advocacy approach. That's bad counsel. With a clear need for economic and corporate reform, CalPERS needs to remain in fighting shape." (CalPERS should maintain its activism, LATimes, 5/5/08) Aflac Pay Approved in First "Say on Pay" Vote In the first “say on pay” vote by a U.S. public company, Aflac investors gave 93% support to the firm’s executive compensation practices, according to news reports. There was only 2.5% opposition at Aflac’s May 5 annual meeting. The Columbus, Georgia-based insurer decided to hold an annual advisory vote after receiving a shareholder proposal on the issue in late 2006. (Aflac’s Pay Practices Get 93% Support, Risk & Governance Blog, 5/5/08) The fact that Aflac shares have risen 3,800%, compared to 549% for the S&P 500 since 1990 probably has something to do with the affirmative vote. Verizon Communications, Par Pharmaceutical, Blockbuster and RiskMetrics have pledged to allow such votes in the future and many others are sure to follow. FASB to Expand Disclosure Requirements for Contingent Liabilities An "exposure draft" expected to issue in about two weeks from the Federal Accounting Standards Board could have enormous SRI implications. The guideline would expand the obligations of reporting companies to disclose contingent liabilities in their financial reports — think climate change, product toxicity, human rights! Here are a few pithy excerpts from the summary FASB posted in advance of the release:
The above courtesy of Sanford Lewis, Strategic Counsel on Corporate Accountability, and lead author of Toxic Stock Syndrome, which demonstrates that sectors affected by product toxicity risks are doing a poor job of informing shareholders of market risks they face due to toxic chemicals in their products.
Spain Joins Norway in Requiring More Women Directors Spain passed a law that requires firms to raise the share of women on boards to 40% by 2015. Norway already has such a quota and some of the most qualified have collected as many as 35 directorships. Unlike their Norwegian counterparts, Spanish companies will not face financial penalties if they do not meet the 40% requirement, although they may be penalized when the government awards public contracts. The Economist notes the gap between male and female employment rates in Spain is over 20% points. Spanish women spend far more time on domestic chores, including childcare, than men. Thanks to long lunch breaks, you get home at 9pm or 10pm. The magazine concludes it may be better to help women gain enough experience to be good candidates for directorships to begin with. Encouraging more reasonable hours would be a start. However, it also notes that a bigger share of women in their 20s are now joining the workforce in Spain than in America. (Jobs for the girls, 5/1/08) Buzzword Governance After reading The Role of Independent Directors after Sarbanes-Oxley If you are looking for guidance on your responsibilities as a director under Sarbanes-Oxley (SOX), you'll find them outlined in the Pocket Guide simply with the titles of 11 sections. You get only a hint of what you need to know. Even if you bother to search out the two articles footnoted, there will still be many gaps in your knowledge. While "Sarbanes-Oxley and Cost Engineering" might be a great guide for how SOX impacts "the world of engineering, architecture, and construction," there are better references for directors. The one page chapter, "Global Governance Comparison," is no better. We are told that "corporate governance various (varies?) from country to country." "Japan, China and South Korea have dramatically different corporate models than those of the United States, Britain and Australia but readers are not given the faintest clue as to how those models differ. We learn that in Germany "a Vorstand is the management board of a corporation where the Aufsichtsrat or Supervisory Board controls the Vorstand." The reader is left clueless as to the composition and roles of these boards, other than that one "controls" the other. Regarding board independence, the authors cite studies that found "having separate committees to nominate, compensate, audit, and govern are more effective ways to monitor governance rather than having the board itself regulate these items." Good advice, as far as it goes. However, the three page chapter, "Committees," simply lists 17 types of committees. It provides no clue as to which are required and what their composition should be. For example, under SOX, only independent directors can serve on audit committees and at least one must be a "financial expert." The NYSE requires a compensation committee for its listed companies; the NASDAQ doesn't. However, the NASDAQ requires that only independent directors may participate in the decisions. Such basic governance requirements are missing from the Pocket Guide but are readily accessed in the Dravis book. At the outset of this review I said the Pocket Guide could be a "useful supplement." The book's "strength" lies in providing a laundry list of buzz words. The buzz words are as likely to be derived from management as from governance discussions. For example, in the chapter on "Best Governance Practice" we are given a few bullet points each on SMART Objectives Technique, KISS Technique, and SWOT technique. (Why is the third heading not fully capitalized?) The chapter on "Commitment to Quality" touches on the following: Business Process Improvement Technique, Six Sigma Technique, Total Quality Management Technique, Five Whys Technique, Cause and Effect Technique, and Taguchi Technique. Other chapters give us a few words on the Learning Organization, Capability Maturity Model Integration, Software Engineering Institute (how Carnegie Mellon institute fits into the typology isn't explained), Total Quality Management (repeating one sentence of the two sentence explanation from the previous chapter, in case you missed it), Pareto Principle, and Total Cost of Ownership Technique. If you might be embarrassed as a director by never having heard of the Taguchi Technique or one of the others, the Pocket Guide will typically provide very brief explanations that might actually be helpful. You can read this one while waiting to board at the airport. It could be 15 minutes well spent. If you only have three minutes, read the appendix and glossary in the back. Following the Pareto Principle, you'll get 80% of the book's value in 20% of the time. Dogs Ten minutes on the phone talking broadly about "say on pay" for executives, what do she quote?...of course, the dog comment. Still Ashley Milne-Tyte does a great job in a few minutes. I'm glad she got out the fact that ten years ago CEO pay took 5% of earnings; now its 10%. The best solution for the executive pay problem is for shareowners to replace directors who don't exercise proper oversight. Under the majority vote model coming into vogue, shareowners can vote these directors out of office, but they can't replace them with directors of their own choosing. For that, we need "proxy access," where shareowners can place their own candidates on the corporate proxy. InvestorRelationships Broc Romanek is editing a new publication, InvestorRelationships.com, to add to the growing family of TheCorporateCounsel.net, CompensationStandards.com, DealLawyers.com, and other sister sites. Where he finds the time, I'll never know. Like the other publications, InvestorRelationships.com is top-notch. Romanek tells me "it's had an incredible response rate... more than anything we have ever done." It is free until the end of the year, so there is no excuse for not signing up. Starting as a quarterly for 2008, it may be published more frequently in the future. As a brief aside, Romanek also interviewed me and plans to post it on May 5th. Listen here. Back to our discussion of InvestorRelationships.com, "Practical guidance for those in investor relations, shareholder services and corporate governance." Although the first issue is primarily aimed at investor relations officers and corporations, shareowners and those who provide them services will also benefit. In addition to the "practical guidance," he also includes a section entitled "Notables: All the Latest," which provides an excellent roundup of recent news and announcements, mostly from regulators like the SEC and FASB but also from gatekeepers and advisors like Risk Metrics (ISS). The goes over some statistics on e-proxy, which he updated later on his blog. Then he gets into the pointers. Some of this is practical advice that will only be of real interest on the IR/corporate side, such as even though only an average of 0.70% of shareowners are asking for paper, "it is much wiser to print more books than needed rather than have to go back and start the presses again." "Creating a communications strategy to explain e-proxy to shareholders should be a standard practice, but has been rarely done so far. Post a set of FAQs and explain why the company is using e-proxy in the “Letter to Shareholders” (i.e., tout the cost savings and the benefit to the environment)." However, the best practices can also be very useful to shareowners. For example, he advises not to neglect employee-shareholders. "A separate campaign strategy should be considered when targeting employees... ensure them of the confidentiality of the voting process." Reading advice like that can also prompt similar action from union affiliated shareowners. The second article is even more forward looking, The Coming Online IR Campaigns: The Future of Director Elections. Tips point to "campaign-like" IR websites and proxy materials of the future, such as using "multi-media to help shareholders 'connect' with each candidate. This can come in the form of each candidate having their own video or audio file (or series of them) during which the candidate explains why they are running, what their qualifications are and anything else they bring to the table." Romanek sees listing endorsements from "RiskMetrics’ ISS Division, as well as other proxy advisors like Glass Lewis and Egan Jones" as a coming best practice and provides excellent advice concerning how to comply with various SEC provisions, such as Rule 14a-6(b). I'll stop there. I just wanted to give readers a sense of my own excitement about this new publication. Sign-up now.
RiskMetrics Reports on Season Trends Resolutions calling for advisory votes on pay have received less support at a number of firms this year versus last, according to a RiskMetrics Group analysis of preliminary vote results through April 30. AFSCME's Richard Ferlauto says it might be attributed to e-proxy; “There’s some preliminary data showing a drop-off in retail voter participation, and our understanding of retail voter trends is that they’ve supported ‘say on pay’ when they’ve cast their ballots.” However, a drop-off in retail voter participation would amplify the voting of mutual funds and other institutions that generally do not back pay vote proposals, proponents say. Another potential explanation for the decline is that investors are more focused on business strategy in light of the bear market, and on righting the ship at those firms that have suffered heavy losses as a result of the credit crisis. So far, “say on pay” proposals have garnered majority support at only two companies—computer maker Apple and Lexmark International, compared with seven last year. Early season data suggest that fewer investors and issuers are settling this year on governance proposal filings. (Analysis: Early Season Trends, Risk & Governance Blog, 5/2/08) Buenrostro's Impending Departure From CalPERS According to Global Proxy Watch, as reported in Directorship, "Board members asked Buenrostro to set an exit two months ago, around the time new trustees took their seats at a Feb. 21 meeting." "Longtime Buenrostro champion Robert Carlson had retired in January." "Chief executive since 2002, Buenrostro, 58, has kept CalPERS at the vanguard of global corporate governance advocacy. But a take-no-prisoners leadership style prompted ongoing concerns about staff morale. He also drew global controversy, most famously at the 2004 International Corporate Governance Network annual conference in Rio de Janeiro, where arm-twisting tactics left a rift between CalPERS and other funds." (CalPERS CEO Departure Prodded by Board, 5/2/08) Both Directorship and Stephen M. Davis, who publishes Global Proxy Watch, are very credible sources and this explanation also rings true from my own understanding of Buenrostro's tenure. Both CIO Russell Read and CEO Fred Buenrostro are now set to leave on June 30. (CalPERS CEO out June 30, SacBee, 5/3/08) Time for us all to move on. Another item that hit the news recently is the possible loss of almost $1 billion in a real estate land investment through LandSource. Again, I haven't heard any credible connection between this development and the announced departures of Fred Buenrostro or Russell Read, the chief investment officer. (see Calpers Takes Hit on Land Deal, WSJ, 5/1/08) ExxonMobil to Face Rockefeller Family A total of 15 Rockefeller Family members filed or co-filed four shareholder resolutions urging ExxonMobil to look beyond its current focus to more effectively address a rapidly evolving energy industry, including the growing market in renewables and alternative fuels that competitors Shell, Chevron, BP, Total and Petrobras now are expanding into to a much greater extent than ExxonMobil. The shareholder resolutions will be voted on when ExxonMobil holds its annual meeting on May 28, 2008 in Dallas. A majority of Rockefeller Family members support Robert Monks' proposal to separate the positions of chairman and CEO. The other resolutions would Establish a Task Force to Study the Consequences of Global Warming on Poor Economies, Reduce Greenhouse Gas Emissions for Products and Operations, and Adopt Renewable Energy Policy. See press release and listen to press conference, 4/29/08. Who's got a longer term view of the company? Webb and Harris Show Courage on Tibet This is the article by Senior Counsel Paul Harris originally commissioned by Hong Kong Lawyer, the journal of the Law Society, the Editorial Board of which approved, but then U-turned and decided not to publish. In the interests of freedom of speech and debate that are cornerstones of HK's success, Webb-site.com is publishing it instead. David Webb's site generally provides an independent commentary on Hong Kong's corporate and economic governance. Sign up for his e-mailed newsletter if you're interested in Hong Kong or China... and who isn't? He's also got a funny side. Retirees May Have to Return to Work Half of all middle class Americans have about a quarter less saved for retirement than they realize, said Matthew Scanlan, head of Americas Institutional Business at BGI and co-author of The Future Shock of Retirement study. And, while some academicians show that Americans are ready for retirement, the BGI research takes the same statistics and challenges those assumptions. BGI's research showed that Social Security and home equity represent a significant component of total wealth - among the middle wealth decile in the study, 40% of total wealth comes from those sources - and, when BGI manipulated the data to account for the reduction of government benefits and home equity, the study found that about one-half of middle class Americans could lose 25% of retirement wealth. (Retirement Might be Worse than We Think, PlanSponsor.com, 4/30/08) Demographic trends that threaten Social Security and Medicare, a trend toward DC plans in which risks are transferred to the individual, and a significant reduction in individual responsibility in the form of low (negative) savings rates all bode for a frightening future.
Human Resources Jim Kristie, editor and associate publisher of the influential Directors & Boards magazine, writes in the May E-Briefing that "good judgment seems to have been short-circuited in the Circuit City boardroom." (Simply Appalling, 5/2008) A centerpiece of the turnaround plan at Circuit City was laying off experienced salespeople, to be replaced with lower-paid hires. The kicker for Kristie was that "those who lost their jobs could reapply for their old jobs, at the lower pay, but had to wait 10 weeks to do so."
Tongue in check, Krisite adds that he was waiting for the follow-up announcement that all board members had resigned "to allow management to replace them with a newer, younger board, which would be paid a lower retainer and fees than the old directors received. Less experienced? Who cares about that? And the current board, after a cool-down period, would be allowed to reapply for their old seats, at the lower scale, of course." Of course, the turnaround at Circut City seems is going nowhere. I had a similar experience. While at the Department of Toxic Substances Control in California, I headed rulemaking, legislative and environmental review functions, as well as serving as the ethics officer. Toward the end of my career there, one of the major issues was how to handle the pending exodus of "baby-boomers," so I was put in charge of "workforce planning." A major task was to convince those nearing retirement, especially those in upper management or with specialized knowledge, to identify themselves. That would facilitate a smoother transition through mentoring, training and other forms of knowledge transfer. However, upon learning of my own pending retirement the director put a stop to my performance-based cost of living adjustment. My performance up to that time had been excellent but, apparently, she decided to measure my anticipated performance, in retirement. Yes, she saved the Department $1,000. However, staff quickly realized that if you don't want to lose $50,000 in benefits over the course of your retirement, keep you mouth shut. Workforce planning became more difficult. Of course, this was just one example of a pattern of crass treatment. As Kristie concludes, "When a company takes steps that are repellent in its treatment of its human resources — its work force and its customers — is it really a business anymore? Or a business that should stay in business?" Sign up for the Directors & Boards e-Briefing. Each issue contains thoughtful commentary, research, a calendar of events and news briefs with excellent links. Toxic Stock Syndrome & Risk Speaking of toxics (as above), the Investor Environmental Health Network has released Toxic Stock Syndrome by Sanford Lewis, Esq. with Richard Liroff, Ph.D., Margaret Byrne, M.S., Mary S. Booth, Ph.D. and Bill Baue, which finds annual securities reports fail to disclose financial risks known to corporate managers. Topics include lead paint, bisphenol A, nanotechnology, asthmagens, European regulation. In the wake of high profile toy and pet food recalls and growing public concern about chemicals in baby bottles, cosmetics, and other products, a record 21 resolutions on toxic chemicals and product safety have been introduced by corporate shareholders during the 2008 proxy season. This compares to just 13 such resolutions in 2007 and 12 in 2006. (press release, 4/29/08; running list of resolutions, their filers, and outcomes) On a somewhat related note, see The Legal Ramifications of Climate Change on Business from Weil, Gotshal & Manges LLP. As detailed in the Bulletin, the law and public policy related to climate change is rapidly emerging at the local, state, federal and international level as well as in the marketplace and has the potential to affect many businesses across the globe. CalSTRS wants ONEOK to report on its greenhouse gas emissions by the end of this year. Shareholders will vote on the proposal May 15. (CalSTRS seeks emissions report from pipeline firm, SacBee, 4/28/08) The credit crunch has pushed risk management to the top of corporate directors’ list of concerns. Investors are increasingly demanding that boards better understand management’s strategy for identifying and mitigating threats to the company, and that they question that strategy to protect shareholders from excessive exposure to the unforeseen. As a result, governance experts expect more companies to establish stand-alone board risk committees (à la UBS) to better tackle the challenge. (Risk climbs to top of corporate to-do list, Financial Week, 4/28/08) Back to the top News from 2008: April, March, February, January News from 2007: December, November, October, September, August , July and June There's plenty of news stored in Archives. The news may be slightly older but, frankly, many of the issues covered are sitll current.
Equal access? The SEC's recent rulemakings, S7-17-07 Shareholder Proposals Relating to the Election of Directors (comments) and S7-16-07 Shareholder Proposals (comments) offered conflicting solutions to what was a nonexistant problem after the decision in AFSCME vs AIG. Unfortunately, they opted for no access and choice-free elections. The SEC's prior rulemaking, S7-19-03 (comments, Editor's: 1, 2 & 3) would have been a weak first step. Compare the petition Les Greenberg and I filed to allow shareholder proposals to elect directors: Petition File No. 4-461, which the Council of Institutional Investors said "re-energized" the "debate over shareholder access to management proxy cards to nominate directors." See Equal Access - What Is It?, Inside Track interview, ad. Evolution at Solicitation of Public Views Regarding Possible Changes to the Proxy Rules and Sharehol Back to the top Contact: James McRitchie, Editor (916) 869-2402 All material on the Corporate Governance site is copyright © since 1995 by Corporate Governance and James McRitchie except where otherwise indicated. All rights reserved. Back to the top
|
||||||||||||||||||||||||||||||||||||||||||||||
, by Sandra Waddock, is a new history and detailed analysis of how corporate responsibility has emerged as a key political, social, and business issue, why it has evolved so quickly, and what the visions of its thought leaders are for the future.
with the Corporate Governance NETwork!