Investor Relations Business [email protected]reports that representatives of the Council of Institutional Investors,American Society of Corporate Secretaries, National Association of Individual Investors and the Interfaith Center on Corporate Responsibility have “tentatively agreed to tentatively agree” to proxy reforms outline by Commissioner Steve Wallman of the SEC in a speech before CII last October. Proposals from those holding 3% or more of company’s outstanding stock would be automatically included in a company’s proxy along with mainstays such as proposals for staggered boards, director compensation and takeover policies. The “Cracker Barrel” decision eliminating all employment-related proxy proposals under the ordinary business exclusion would be overturned. A draft is currently being hashed out by attorneys.
In other news from IRB, the number of companies with Internet sites has increased from 35% in 1995 to 80% in 1996 with only 1% not planning a site according to a recent survey by Straightline International (compare with last year’s findings). 57% of money managers surveyed use the Internet for company research.
Small companies are much more likely than large corporations to pay board members in stock, according to a report released by accounting firm Grant Thorton and Segal Co. The study analyzed 199 small-cap companies with median annual sales of $107 million. (WSJ)
Religious investors and a union pension fund asked the SEC to overturn a rule that lets companies keep workplace-related shareholder requests off their ballots. They are seeking to overturn a ruling that allowed Shoney’s Inc. to omit a shareholder request on disclosing its record on hiring women and minorities from its proxy. The group consists of the General Board of Pensions and Health Benefits of the United Methodist Church.; the Sisters of St. Dominic Congregation of the Most Holy Name; and the Sisters of Mercy Health Services; along with the Amalgamated Bank of New York LongView Collective Investment Fund, representing the Union of Needle Trades, Industrial and Textile Employees. (P&I Online)
Virginia’s Retirement System is looking at the possibility of investing in hedge funds. The $24 billion fund, which already has an extensive alternative investments program, hired a new consultant, to analyze the feasibility of hedge funds and other alternative investments. (P&I Online)
Investor Relations Business reports the SEC will conduct a year-long study of proxy rules. SEC Corporation Finance Director Brian Lane, who is directing the study, says it should be out in early February. The survey will be widely distributed to corporations, institutional investors and activist individual investors. The SEC hopes to begin tabulating results at the end of the proxy season in order to report by end of the year on their recommendations. Public hearings and meetings may also be used to try and reach consensus. In another report, D&O claims were up from $6.8M to $7.3M in a yearly survey by Watson Wyatt Worldwide . A record 30% of companies were hit over the 9 years leading to 1996 but premiums fell to their lowest level since 1992. “It could be that insurers are getting better at determining which companies are good risk candidates…” The survey is available for $350 from Mary Maze at 312-704-2719 and is based on responses from 1,010 US companies, over one-third of which have assets exceeding $1B.
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Hostile acquisitions were down last year and accounted for only about 0.3% of the year’s 10,150 announced transactions, according to a report by Securities Data Company as quoted by Institutional Shareholder Services. ISS also reports thatCalPERS has issued minimum standards for global markets which include holding directors accountable to shareholders, transparency of accounting standards, equity in voting principles, codes of best practice and long-term vision, among other principles.
Active investors were highlighted in an informative Friday Report by Institutional Shareholder Services. Mentioned wereMichael Price’s Heine Securities (recently purchased byFranklin Resources), George Soros, Lindner Investments,Greenway Partners, Providence Capital, Relational Investors, Batchelder & Partners and the LENS Fund as well as theCouncil of Institutional Investors, Investors’ Rights Association of America, the Interfaith Center on Corporate Responsibility and the International Brotherhood of Teamsters. “Far from a passing market phenomenon, noisemakers promise even more ‘in your face’ activism for 1997. Barriers to entry and carrying costs are exceptionally low and the potential payoff is high- as evidence by the returns at RI and LENS.”
Michigan passed a measure installing a 401(k)-style option for state employees, according to a 12/23 report in the Wall Street Journal. The move is expected to boost similar proposals in other states, such as California. Under the plan the state matches employee contributions up to 3% of annual income. Existing state employees can stay with the current defined benefit plan but all new employees, except for school system employees, will go come under the new plan. Employees will make their own investment decisions and bear the risk. CNNcarried a storey in January 1996 that Michigan’s public employees were upset because treasurer Doug Roberts had sunk almost $400 million from the $34 billion Public Workers Pension Fund into tobacco company stocks. Meanwhile, Michigan was spending almost $6 million to get citizens to break the tobacco habit and to try and stop cigarettes from being smuggled into the state. Under the new plan, employees won’t face such problems; they can direct their own money. However, they are unlikely to have a collective voice in corporate governance matters since few mutual funds actually act as owners. The big winners are expected to be mutual funds such as Fidelity Investments; the losers are likely to be society at large and Michigan employees who don’t beat the averages.
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Transparency International reports Nigeria and Pakistan topped its “Corruption Perception Index” while New Zealand and Denmark were perceived as less likely to condone corrupt business practices. A January 2, 1997 outlook piece in the Wall Street Journal called on countries to do away with tax deductions for foreign bribes.
The December issue of the Corporate Secretary carries experts from an address by Chancellor William Allen, of the Delaware Chancery Court. “The growth of institutional investors has been very destabilizing. Institutional investors now have enough power but not enough economic incentive to make judgements on management beyond a very small level. So they have to rely on the board of directors…The central idea of corporate governance is an engaged board of directors – not an advisory board, but a monitoring board. That’s what institutional investors need.”
In addition, they report on several corporations who took advantage of a new proxy voting process pioneered by Proxy Services Corporation which facilitates telephone voting.
From the same source, Deminor, a Belgium-based shareholder advisory firm reports that American institutional investors are having a growing influence on corporate governance in European companies. Their study indicates that English companies rank first in terms of advancement, followed by France, Germany, Belgium and the Netherlands of the countries studied. European companies wishing to compete for international capital are warned they need to establish higher standards by improving shareholder communications.
The December issue of Director’s Monthly focuses on auditing, the FASB, and CFOs. The lead article from John J. Flaherty, Chairman, Committee of Sponsoring Organizations of the Treadway Commission provides several specific recommendations for audit committees.