September 2002

CorpGov Bites

How the Corporate Landscape Is Changing. outlines the prospects for pages of corporate governance reforms.

Providence Capital to another institutional shareholders meeting. This one will focus on Healthsouth (NYSE: HRC). Items on the agenda include Medicare issues, current leadership and business strategy, the Company’s corporate governance and the host of lawsuits recently filed against and on behalf of the Company. Shareholders can attend in person or via teleconference. Tuesday, October 1, 2002
Time: 4:15 pm (EDT)
Place: Providence Capital, Inc.
730 Fifth Avenue
Suite 1002
New York, New York 10019
RSVP at 212-888-3200

Securities and Exchange Commission Chairman Harvey Pitt proposed changes to proxy rules in a speech before the Council of Institutional Investors. Pitt suggested eliminating SEC rule 14a-8(i)(7). This rule allows companies to omit from their proxy statements shareowner proposals that deal with “ordinary business,” or matters that are of concern to management, not shareowners. (see SEC Chair Proposes Eliminating Ordinary Business Exception in Proxy Rules,, 9/25/02)

Alaska Permanent Fund Corp. Corporate Governance Forum, 10-11:30 a.m., Egan Library in Juneau. Public invited. Details: (907) 465-2047.

According to a recent Harris Interactive poll commissioned by the Calvert Group found that 32% of investors with employer-sponsored retirement plans say that their plan offers an SRI option. 68% of investors with such an option choose it.  74% of respondents whose companies do not offer an SRI option for their retirement plan said they would invest in one if offered.  On the other hand, only 41% were aware that SRI mutual funds exist – and of these, just 25% actually invest in at least one SRI mutual fund.

“No one can legislate, or by rule-adoption, mandate honesty,” Grasso told the Council of Institutional Investors. “What we can do, what we must do … is send a very powerful message. The system isn’t broken.” Forbes reported that pension fund managers didn’t buy it. “Tough talk and rule proposals have not halted the market decline or alleviated the worries of individual investors whose retirement savings are at stake.” (NYSE chairman faces heat from U.S. pension fund managers, 9/24/02)

CorpGov Classes Grow

More universities are recognizing the importance of corporate governance. The Executive Development Center in the Office of Extended Studies at California State University San Marcos offers a course on “Corporate Governance: Building Better Businesses Through Better Boards,” beginning Oct. 15. Panelists will lead students through a three-hour class that meets one night each week for five weeks. The course covers board leadership, strategy, structure, operations, oversight, financial and accounting models and ethical and legal issues.

The University of Technology Sydney, in Australia, has established a Centre for Corporate Governance to address weaknesses within the corporate sector.

Underfunded Pension Funds

Standard & Poors noted that the average funding ratio of corporate defined benefit plans stood at 94% at the beginning of July, compared with a 100% funding level at the end of 2001 – and noted the funding level may have declined another 4-5% since then.  The following companies account for $37.5 billion out of a total funding shortfall of $65.4 billion :

  • General Motors
  • Exxon Mobil
  • UAL
  • Ford
  • Delphi
  • Delta Air Lines
  • United Technologies
  • Northwest Airlines
  • AMR
  • Pfizer

State pension plans report with more of a significant time lag. Wilshire Associates forecasts that underfunded retirement systems will grow from 51% to 75% of systems when 6/30/02 reports are available and analyzed. (S&P: Pension Pressures May Push Public Funds,, 9/24/02)

Support for SEC Petition No. 4-461 and Variations Grows

Support for our petition to open the corporate proxy to shareholder nominations and elections continues to grow.eRaider, for example, has now followed suit with their own petition and I expect there will be several more. Electronic comments to the SEC that specifically mentionRulemaking Petition File No. 4-461 in the subject line of an e-mail to Mr. Jonathan G. Katz appear to get posted to an SEC comment page in about a week. If you mail a comment and it doesn’t get posted, please let us know.

I have reason to believe that leaders from organizations as disparate as the AFL-CIO and the Business Roundtable might support the petition if the threshold were set at something like the 13D level of 5%. I would encourage everyone to suggest their own amendments to our petition. Please do so formally to the SEC, either by commenting on our petition or submitting one of your own so that your views will be heard and considered.

Investors dumped $49 billion in mutual funds during July and another $5.8 billion in August, according to Lipper. Harvey Pitt’s 9/23 Remarks Before the Council of Institutional Investors’ Fall Conference that he has asked staff to consider eliminating the “ordinary business exception” indicates a willingness to consider major changes to restore investor confidence. At the core of making “shareholder suffrage a reality,” as Mr. Pitt termed it, are the rules that govern board elections. CII took a stand years ago against broker voting. I hope they will lead the movement to resurface that issue and I hope they widen their vision to include the central issues of shareholder nominations and access to the company proxy.

CGF Report Carves New Niche

I’ve mentioned it before, but Maureen Nevin Duffy’s new publication, Corporate Governance Fund Report, has quickly become an invaluable service to those of us who are “pushing back” to restore trust in capital markets. Her reporting on Proactive Investors is outstanding.

In “Who’s Hot in September? – Andrew Shapiro,” Duffy reports his most recent innovation is being appointed to “Board Observer” status at Earl Scheib. Another first, as far as we know. Shapiro shares the same trading restrictions as Earl Scheib directors and basically will act much like a board member but without the vote and without the liability. We’re waiting to see what he will do at Arlington, where he is Chairman of the board’s Corporate Governance Committee. (In the interest of full disclosure, the editor of CorpGov.Net is a limited partner investor in a fund managed by Lawndale Capital Management, LLC.)

Duffy also discusses what governance leaders thought of the agreement between Computer Associate’s and Sam Wyly’s Ranger Governance. She takes you behind the scenes in what Guy Wyser-Pratte calls the “German Enron” (Babcock Borsig), reviews Ralph Whitworth’s success at ousting Tyco directors and even keeps us informed of what’s happening in Brazil at the Sao Paolo Stock Exchange. Observing that “reforms are spreading through Corporate America faster that the Dow is dropping,” Duffy predicts “we’re going to see dramatic changes in investor involvement, on the scale of the consumer movement of the 60’s and 70’s.” As more read the Corporate Governance Fund Report, her predictions could become self-fulfilling prophecies.

Class-Action Suits Up

Millions of angry investors have lost billions and there are many to blame: corporations, fat-cat executives, boards, lawyers, accountants and financial advisers, investment bankers and analysts. Enron and its executives have been hit by 45 securities lawsuits, Adelphia by 56 and Tyco by 60. The potential legal fees are staggering. In the suit against Enron and its Wall Street advisers, some experts estimate claims could exceed $30 billion. Last year, the average class-action settlement in securities cases jumped to $17.2 million, up from an average of $14.1 million in the previous five years, according to a study by PricewaterhouseCoopers (PwC).

Lawsuits targeting banking and brokerage firms have jumped to 12% of the total this year, up from 2% last year, according to PwC. In a highly unusual incentive program, CalSTRS and two other large California pension funds have offered to pay their lawyers higher fees in a case against WorldCom if they can substantial contributions from former CEO Bernie Ebbers or 14 other executives. Executives almost never pay a penny of their own money and pushing for them to do so usually drags out the settlement process. In a study of a dozen $100 million-plus class-action settlements since 1995 by Joseph Grundfest, a Stanford University Law School professor, only two included contributions from executives, representing a fraction of the total settlements. Here’s hoping the percentages rises quickly. For more information, see the Securities Class Action Clearinghouse.

Koppes Joins IRRC Board

Richard H. Koppes, former Deputy Executive Officer and General Counsel of CalPERS and currently with Jones, Day, Reavis & Pogue, has joined the board of the Investor Responsibility Research Center. Mr. Koppes also serves as Co-Director of the Executive Education Programs at Stanford Law School, and does private consulting for corporations. Koppes is recognized internationally as a leading expert in corporate governance, especially in the role of pension fund investors in corporate governance and fiduciary duties. Mr. Koppes served as a member of the NY Stock Exchange Board of Governors’ Legal Advisory Committee from 1994 to 1997, is a member of the American Society of Corporate Secretaries, the Council of Institutional Investors, the Advisory Board of the National Association of Corporate Directors, the Blue Ribbon Commission on Board Evaluation of the NACD, the American Law Institute, and the International Bar Association where he serves as Vice Chairman of the Corporate Counsel Committee of the Section on Business Law. He is the founder, past president and current administrative officer of the National Association of Public Pension Attorneys. IRRC’s research, software products and consulting serve a wide range of clients including some of the largest institutional investors in the world, as well as corporations, law firms, and socially responsible organizations. Although somewhat dated, we interviewed Koppes as he transitioned from CalPERS in July 1996.

Corporate Governance in the U.S. and Japan: A Changing Environment

On Wednesday, October 2, the Japanese Chamber of Commerce and Industry of New York, in collaboration with Michael Solomon Associates, is sponsoring a half-day symposium that will examine the changing corporate governance environment in the U.S. and Japan from the viewpoint of corporations, institutional investors, and legal and academic experts.

Holly Gregory (Weil, Gotschal & Manges) and Bruce Aronson (Columbia Law School) will discuss the changing regulatory environment in a panel moderated by Satoru Murase (Bingham McCutchen Murase). In the second panel, moderated by Hugh Patrick (Columbia University), Carolyn Brancato (Conference Board) and Hideji Tanaka (Cerberus Capital Management) will discuss how corporations in both countries are responding to pressure to improve their governance practices.

The role public pension funds and other institutional investors are playing in promoting better governance practices will be discussed by Peter Clapman (TIAA-CREF) and Yasuhiro Fujii (Ministry of Health and Welfare). The luncheon keynote speaker will be John Towers, the vice chairman of State Street Corporation, who will provide a perspective on these issues from one of the largest investment management firms in the U.S. Contact Leslie Brown of the JCCI at (212) 246-8001

4th Annual Triple Bottom Line InvestingConference 2002

When: 7 & 8 November 2002
Where: Hotel Le Plaza, Brussels, Belgium
The theme for this year’s conference is SRI and Governance. In addition, there will be analyst meetings where leading multinationals from various sectors will present their sustainable performance for the last year and their strategy for the coming year. 24 workshops and 105 speakers, TBLI is truly the leading SRI learning and networking event of the year. Call Netherlands + 31 (0) 20 428 6752 or email:

Strategic Summit on Auditing and Governance in the New Era of Accountability

When: December 9-12, 2002
Where: The Embassy Suites Hotel, New York City
Fees: Summit: $1095, Summit after 12/2: $1195, Workshops: add $450 each
More Info: MIS Training Institute

SEC to Require Mutual Fund Disclosure of Votes?

Staff members at the SEC are expected to propose that mutual fund and other investment managers be forced to say publicly how they vote their shares in corporate proxy fights. Mutual fund managers push for openness from companies in which they invest while, at the same time, battling similar initiatives to bring more disclosure to the fund industry itself.

The proposed rule will be considered at an open meeting Thursday. In addition to requiring disclosure of their proxy-voting records, investment managers would be mandated to disclose the policies and procedures they use to determine how to cast their votes. The SEC will set a public-comment period on the rule proposal, normally at least a month. Then, before taking a final vote on the matter, the commission will spend a few additional months reviewing the comments, which may result in modifications to the original rule proposal.

Mutual funds hold about $3 trillion in stocks, about 21% of the U.S. stock market on behalf of 93 million investors, and are often the largest stakeholders in public companies but only a few SRI funds disclose their votes. Fund companies are worried about offending corporations which subscribe to their 401(k) retirement plans.

The SEC’s disclosure on the subject consists of a two-paragraph news digest item published recently. It says the SEC is considering requiring mutual funds and certain other investment companies and advisers to disclose the “policies and procedures” they use to determine how to vote proxies. Additionally, it might require “management investment companies to file with the commission, and make available to shareholders, their proxy voting records.”

Update 9/20: The SEC’s proposal would require mutual fund companies to

  1. disclose their proxy voting guidelines;
  2. provide a full listing of their voting record twice a year to the SEC;
  3. discuss and disclose proxy votes inconsistent with the Fund’s voting guidelines and
  4. disclose to shareholders the availability of information about its proxy
    voting policies and procedures, as well as its voting record.

The Commission proposal will include the requirement that mutual funds make their voting records available, upon request, within 3 working days, to any investor seeking that information. The information will also be made available on the SEC website on the EDGAR Filing System. Posting the guidelines and voting results on a mutual fund’s website is optional and at the discretion of the Fund company. It was not mandated that votes be posted on fund company websites. The rules for investment advisors are tailored to the “customized” nature of their investment advisory mandates. A 60 day comment period is likely to begin shortly. The new rules would be a tremendous victory for corporate governance advocates. At CorpGov.Net we have been pushing for voting disclosure since the inception of our internet site in 1995. Scandals do provide opportunities.

Domini Social Investments was the first mutual fund company to start publishing its proxy voting guidelines in 1996 and its proxy voting record in 1999. A few other SRI firms followed suit, including Pax World Funds in May 2000, MMA Praxis in October 2000, the Calvert Group in April 2001, and Citizens Funds in September 2002.

Providence Capital to Hold Disney Meeting

Providence Capital, a corporate governance reform advocate will hold a meeting open to Disney shareholders on Sept. 17 in New York. “In view of Disney’s recent stock performance, we believe the board would welcome the views of its largest stockholders prior to instituting changes in the company’s governing body,” said Providence Capital President Herbert Denton. (Disney suffered a 22% decline this year) The purpose of the meeting is “to provide a forum for Disney’s major shareholders to discuss their views on a number of critical issues which have undermined investor confidence in Disney’s stock.”

Providence spokesman Jay Hill, who recently endorsed our Petition for Democracy in Corporate Elections (SEC Rulemaking Petition File No. 4-461), said his company is a relatively small institutional shareholder, owning less than 1 percent of Disney’s outstanding shares. He said the company organized the meeting because of its past emphasis on corporate governance issues, which have included meetings about troubled conglomerate Tyco International Ltd. and ICN Pharmaceuticals, where dissident investors forced founder Milan Panic to step down after a proxy fight in May.

For additional information on the meeting, please contactJay Hill, Providence Capital, Inc., 730 Fifth Avenue, Suite 2102, New York, New York 10019 RSVP at 212-888-3200 Fax: 212-888-3203.

AFL-CIO Office of Investment Seeks Financial Initiatives Coordinator

The AFL-CIO Office of Investment is seeking qualified candidates for the position of Financial Initiatives Coordinator. Workers’ retirement savings constitutes the country’s largest single source of investment capital. The Office of Investment seeks to promote the interests of worker-beneficiaries in the capital markets by leading shareholder initiatives, advocating for effective legislative and regulatory reform, and supporting active ownership and corporate governance reform strategies of worker pension and benefit funds.

Recent office initiatives include shareholder proposals to enhance board of director accountability, promote auditor and analyst independence, reign in excessive executive pay and encourage the adoption of ILO labor standards; shareholder campaigns to oppose re-incorporations in Bermuda and the re-election of Enron directors to other public company boards; and multi-pronged efforts to defend and strengthen defined benefit plans and the Social Security system in order to protect workers’ retirement security.

As a member of senior staff, the Financial Initiatives Coordinator will:

  • Design and oversee highly skilled, multi-disciplinary research and campaign teams for capital market initiatives, including shareholder campaigns, corporate governance projects, proxy contests by worker funds, and public policy and research initiatives.
  • Identify capital market intervention opportunities for worker funds, conduct supporting research, including the preparation of detailed corporate critiques, and develop and implement effective initiatives.
  • Identify key public policy and legislative issues, and formulate capital market advocacy strategies.
  • Implement departmental projects, including production of specialized analyses, reports, speeches and testimony, and preparation and staffing for conferences and meetings.
  • Work with pension fund trustees, investment managers, investment bankers, and financial industry organizations to implement initiatives.


  • Masters degree or higher in relevant field, with law or MBA degree strongly preferred. Must be published on relevant subject mater in a reputable publication (candidates will be required to produce a portfolio of published articles).
  • Demonstrated competence in corporate finance and governance, including familiarity with securities laws and rules and regulations, and pension and benefit issues, including ERISA; quantitative and qualitative research, including financial analysis, industry research, corporate research and issue research; researching and writing high quality reports that will withstand significant legal, media, public, legislative, regulatory and business scrutiny and criticism.
  • Excellent writing skills, political and organizational skills, and the ability to work well with others.
  • At least seven years relevant work experience.


Send your resume and a writing sample to Michael Garland, AFL-CIO Office of Investment, 815 16th Street NW, Washington, DC 20006 or fax it to (202) 508-6992.

Deloitte & Touche Provides Online Learning Opportunity

DeloitteLearning provides a valuable online corporate goverance training curriculum available for free to anyone who registers on the site. We’ve added their listing to ourClasses page. Courses include:

  • Capital Markets Overview
  • Complex Financial Instruments
  • Executive Compensation
  • Information Technology for Executives
  • Privacy and Data Protection
  • The Securities and Exchange Commission

Expensing Options Inevitable

A recent survey by Mercer Human Resource Consulting found that 8% of US employers believe that option expensing will be mandated within five years. Only 37% have formally considered the issue at the executive or board level. Only 5% plan to lobby actively against option expense recognition. (see Coming: No Option on Options,, 9/6)

Corporate Governance Goes Mainstream

CBSMarketWatch carried a series of articles on corporate governance. Shareholders strike back, credits Walter Hewlett with starting “a war that has spread to every boardroom in corporate America.” After providing some background, the article concludes, there is no shortage of proposed solutions to fix corporate governance practices.

“They include creating an independent office of the chairman to restrict CEOs from wielding too much influence; banning directors from selling stock while serving on the board; formal nominating committees to select directors; and mandatory boardroom peer-reviews.

What investors are likely to see is a tighter definition of independent directors, compensation committees run by directors unaffiliated with the company, a greater number of outside directors sitting on boards, and continuing education requirements for boards.

More controversial regulatory reforms — such as stockholder approval of all stock option plans and limiting the influence of CEOs on boards — will be more difficult to get accepted, corporate governance experts predict.”

Small investors: Little clout on boards reviews the responsibilities of boards and what small shareholders can do. The average board has eight directors. “Last year, directors spent an average of 175 to 200 hours at each board they served, according to the NACD. Public companies pay them from an average of $45,000 for small companies to an average of $152,000 for the top 200 U.S. companies in salary and stock options, the trade group said. And directors of most for-profit companies don’t have term limits.”

The article provides an example of a shareholder activist. Jill Ratner, who heads the Rose Foundation for Communities and the Environment, sought to curb Maxxam’s logging practices. Even with the backing of major pension funds, it’s almost impossible to change the board, she found out.

The list of shareholders cost her $1,000. Then she then hired an attorney to draw up a proxy statement and card for an expensive mailing to each stockholder urging them to vote for her slate of directors. “The three proxy battles she waged failed by voting margins of 78 percent to 97 percent.” The article goes through a number of tactics but in the end appears to conclude that the best course for small investors is to sell.

A commentary, More disclosure, not regulation, is what’s needed, by Nell Minow offers more hope. As we press for changes, she suggests we keep the following three caveats in mind:

  • Structural solutions are easily subverted. Tinkering with the definition of “independent director” or removing non-independent directors on various committees will have no real impact. “Independent” can mean “indifferent.” While it is tempting to impose new requirements about who should be on what committees and how many meetings they should have, that would have little impact on substance.
  • Consider the law of unintended consequences. We do not want to turn minimum standards into safe harbors. We have to be careful in crafting the listing standards so that instead of imposing obstacles to innovation, they reward it. The best way to address these two concerns is to change the rules on disclosure rather than structure.
  • The third caveat is that all of the reform proposals I have seen so far focus on what I call the “supply side” of corporate governance, on what corporations must do. We must consider these issues from the perspective of the “demand side” to make sure that barriers to shareholder oversight are eliminated.
    • Companies should be required to include their corporate governance policies and conflict-of-interest policies in their proxy statements. If they waive those policies at any time, that should be disclosed, along with the reasons for the waiver.
    • Institutional investors should be required to disclose their proxy voting policies, any votes cast contrary to those policies, and all votes in contested elections. Their votes should be kept confidential until after the date of the meeting at which they are cast, so that management can’t coerce them into changing.

In EMC activist gets post-Enron boost, Tim Smith of Walden Asset Management, credits the change in mood since Enron with his ability to win majority support for a resolution that calls on the company to put more independent directors on its board.

The legacy: a fair share of victories recounts the history of shareholder activism and includes a timeline of important events. Crashing the party highlights some of the “big moments” at annual meetings this year. Stung by critics, Disney reforms board recounts how Disney is finally getting the message by making a number of reforms and by hiring Ira Millstein, noted attorney and corporate governance expert, to help guide them. Teamwork of dubious value discusses a mechanism used to “foster teamwork among the highest ranks of a corporation” the office of the chairman that includes the chairman, chief executive, president and the vice chairman in a structure that allowed for “power and responsibility sharing.” In acutuality, it appears more likely to reduce checks and balances, as well as accountability. The series of articles includes filmclip interviews wth Harry Snyder of the Consumers Union who puts his faith in lawsuits and with Charles Elson, director of the University of Delaware’s Center for Corporate Governance, who see market forces ralling the needed reforms.

The series ends with Are shareholders the problem?Marjorie Kelly, editor of Business Ethics magazine and author of The Divine Right of Capital. “Under the current rules of governance, as long as he didn’t get caught, Enron CEO Ken Lay had a fiduciary duty to lie, cheat and steal in the name of the shareholders, she says. because maximizing shareholder value is the only principle corporations understand.” Kelly argues that corporate boards that represent only shareholders are like feudal societies that only served the interests of the aristocracy. “People say we need better alignment” between management and shareholder interests, Kelly says. “I say no, that’s the problem.” Paying managers in stock increases the incentive for them to cook the books or to engage in shortsighted behavior that might boost the stock price now while eroding the long-run value of the company.

Hats off to for a fine series of articles.

Back to the top

Improvement Would Pay Dividends in in Thailand

A study of the 100 largest companies listed on the Stock Exchange of Thailand found that companies with strong corporate governance practices have higher market valuations. Many Thai companies have ample room for improvement, particularly in the areas of minority shareholder rights, management oversight and incentives, and disclosure. A Mckinsey report suggests that Thailand’s government and regulatory authorities could help by providing corporate governance rules, incentives, and educational efforts.

SEC Adopts Rules

Members of the SEC voted to require companies to file annual 10-K reports 60 days after the end of the year, instead of 90 days, and quarterly 10-Q reports 35 days after the end of each quarter, instead of 45 days. The SEC also voted to:

  • Require corporate officers to disclose any purchase or sale of their company’s stock within two days.
  • Require that CEOs and CFOs certify the accuracy of their financial reports. (SEC speeds up reporting, CNN, 8/27/02)

Issues in Corporate Governance: Bloomberg Roundtable 

Raymond Troubh, interim chairman of Enron, Charles Elson, director of the Corporate Governance Center at the University of Delaware, and Damon Silvers, associate general counsel for the AFL-CIO, talk with Bloomberg’s Mark Jaffe about the impact of new corporate governance rules on companies’ boards of directors. Damon Silversvoiced his opinion that shareholders representing 5-10% should be allowed to nominate board members and those nominations should appear on the corporate proxy. Elson favors, instead, an easier takeover process for replacing inefficient boards. Troubh wants more in the way of forensic accounting. Listen to the Bloomberg Roundtable.8/23/02

Directors Go Back to School

Back to School, but This One Is for Top Corporate Officials, reads the article’s headline in the 9/3/02 New York Times. It’s not reassuring to learn that only 20% of the class of “about 80 officers and directors from companies including Pfizer, McDonald’s, Motorola and Dow Chemical” knew the definition of “retained earnings — undistributed earnings that have not been paid out to stockholders or transferred to a surplus account.” Still, it’s good to know that more directors are getting an education. For information on similar programs, see oureducation page.

Two courses focusing on leadership and business ethics, both from an Islamic perspective, will be taking place in Dubai in October. The courses have been organised by the Middle East offices of the Institute for International Research (IIR) in Dubai. “In the light of recent financial scandals, we are noting an increased interest in the issue of corporate governance from companies operating on Islamic principles,” said IIR event organiser Chris Mullinger. “Both the Leadership and Motivation and the Business Ethics courses have been designed for Muslims and non-Muslims in business. They will provide direct, practical guidance to executives and key workers in a Muslim organisation as well giving expatriate executives of multinational companies valuable insights into working in Muslim countries and with Muslim companies.”

Proxy Season Roundup

NACD publication, Director’s Monthly, reports the message from this proxy season was loud and clear – “put more independent directors on boards, let shareholders vote on executives’ pay and severance packages and don’t allow a company’s auditor to do consulting work with the firm.

The new winner this year was the “auditor conflict” resolution, which asks companies not to hire the same accounting firm for audit and non-audit services. This labor resolution at 12 companies won an average of 29.8% of the vote, with the vote at PG&E coming in at 46.5%.

At Mentor Graphics, investors approved – by a margin of 57% – a resolution by TIAA-CREF asking the company to put all stock plans with material dilution to a shareholder vote.

John Chevadden’s resolution at Airborne on their poison pill garnered 91.4% of the vote. Seventeen out of 100 social proposals won votes exceeding 15%. “High vote-getters focused on human rights, equal employment and global warming. For a full roundup, see IRRC Tally Shows Record Support for Shareholder Proposals in 2002.

Canadian corporations faced fewer shareholder proposals, according to Fairvest’s Corporate Governance Review. In 2001, 12 companies included a total of 39 shareholder proposals, compared to 16 companies and 63 resolutions in 2000. As Fairvest wrote their June/July edition in 2002, 13 companies accounted for only 28 shareholder proposals. The five big banks accounted for 21 of all shareholder proposals.

At the Hudson’s Bay Company 36.8% of voted shares supported a shareholder proposal calling on the company to reflect the International Labor Organization’s Fundamental Principles on Rights at Work in its Company Code of Vendor Conduct and standard purchase contracts. The level of support is high, considering that the Caisse de depot et placement du Quebec, which holds more than 10% of outstanding shares, abstained from voting on the proposal.

The identical proposal at Sears Canada, which is 55% owned by Sears in the U.S., garnered only 6.3% support, whereas in the U.S., the same proposal got 9.35% of shares voted.

CorpGov Bits

Arianna Huffington joins those calling for mutual funds to meet their fiduciary responsibilities by becoming active in corporate governance. Mutual funds: Corporate crime’s lumbering, narcoleptic giant, 8/26/02.

The California Court of Appeals set oral arguments for 11/13 on a lawsuit blocking pay hikes for 10 CalPERS internal portfolio managers as well as for board members themselves. Last October, a Superior Court judge ruled that the System attempted to circumvent state. CalPERS appealed the ruling. State Controller Kathleen Connell, who refused to grant the pay increases, sued CalPERS for issuing the checks directly.

Standard & Poor’s is surveying corporate pension plans to get a handle on their unfunded liabilities. S&P sent out 700 surveys as part of a broader move to better factor in unfunded liabilities of corporate pension plans when rating companies’ debt. Early indications show that pension plans of manufacturing companies have been hardest hit because the number of retirees receiving benefits often outnumber the amount of employees still working. One warning that a company is having trouble with its pension fund is when it uses the proceeds of a securities issue to help cover the unfunded portion of its pension plan. (S&P Surveys Companies To Factor Pension Plans More Heavily In Ratings, 9/4/02,

The 8/19 version of Investment News included an interesting interview with Jamie Heard, the CEO of Institutional Shareholder Services Inc. See One on One: “We have a huge problem now – the public mistrust of corporate America.” From the Archives search function near the bottom of the page, search Jamie Heard.

A study by the National Whistleblowers Center found that about half of whistle-blowers who expose workplace wrongdoing experience are fired. Others face harassment, or unfair discipline.

Richard Grasso, head of the New York Stock Exchange and an outspoken advocate of corporate governance reform, d failed to disclose his stock ownership properly to financial regulators for five years. Grasso, a director of Computer Associates, didn’t file reports with the SEC over the past five years that noted company stock awards. Neither did Former US Senator Alfonse D’Amato, another Computer Associates director.

eRaider joins move to petition the SEC to mandate that public companies place the names of all legitimate director candidates on ballots distributed to shareholders,similar to that submitted by McRitchie and Greenberg. Additionally, they will ask the SEC to disallow broker votes, ban the use of corporate funds for campaigning for any candidate and strike down unreasonable qualification tests for director candidates.

Research by the Institute for Policy Studies found that CEO pay at 23 companies under investigation for accounting irregularities earned 70% more than the typical CEO at a large company. They banked an average of $62 million from 1999 to 2001, compared with $36 million for the remaining 300+ CEOs in the survey. [The (Fat) Wages of Scandal, BusinessWeek, 9/9/02]

The contribution of the CEO’s reputation to the corporate brand has increased 20% from 1997 to 48% today, according to research by Burson-Marsteller. (Director’s Monthly, NACD, 8/02)

Chief executives at five of the six leading Wall Street banks hold one or more outside corporate directorships, in some cases on the boards of companies that have a close banking relationship with their firms, according to an informal survey by AFX Global Ethics Monitor.

A survey conducted by the Investor Responsibility Research Center found that 72% of the $5.7 billion in fees paid by 1,200 public companies to their auditors in 2000 was for nonaudit services. The Sarbanes-Oxley Act will place new restrictions on the services that auditors can provide for their clients and will establish an independent board to oversee the industry for the first time in its history. The New York Stock Exchange will prohibit auditors of listed companies from serving on the boards of clients for five years. Nasdaq-listed companies will be prohibited from hiring former auditors at all levels for three years. (No More Mr. Nice Guy,

Book Bites

Building Public Trust: The Future of Corporate Reportingby Samuel A. DiPiazza and Robert G. Eccles argues the restoration of trust requires a drastic overhaul corporate reporting.

Corporate Boards: New Strategies for Adding Value at the Top by Jay Alden Conger, et al argues that, with technology at the heart of 21st-century business, corporate directors need to recognize the value of knowledge as a strategic asset, putting their focus on meeting not only the demands of shareholders but also those of stakeholders, including employees and the global communities in which they operate.

Takeovers, Restructuring, and Corporate Governance by J. Fred Weston, Juan A. Siu, Brian A. Johnson provides a conceptual framework.

Reinventing Your Board: A Step-By-Step Guide to Implementing Policy Governance by John Carver, Miriam Mayhew Carver outlines effective board decision making and offers practical advice on such matters as setting the agenda, monitoring CEO performance, defining the board role.

A Theory of the Firm: Governance, Residual Claims, and Organizational Forms by Michael C. Jensen examines the forces, both external and internal, that lead corporations to behave efficiently and to create wealth.

Business: The Ultimate Resource by Perseus Publishing is an ambitious compendium of essays, biographies, and source materials. With over 2,000 pages, it weighs a ton, so don’t plan on taking it the beach. Includes:

  • Original best-practice essays from over 150 of today’s thought leaders
  • Profiles 100 influential business pioneers and management thinkers (few in the area of corporate governance)
  • Summaries of 70 most important business books (again, short on corporate governance)
  • Over 300 practical checklists, covering many areas of management and career development
    –A world business almanac covering more than 150 countries, all 50 US states, and 24 industries
    –A dictionary of 6,000 business terms
    –A list of 3,000 information sources (books, journals, Web sites and organizations), covering 115 topics

Business: The Ultimate Resource doesn’t compare withCorporate Governance (International Library of Critical Writings in Economics), but the price is hard to beat, especially if you can get it used. I’ve got both on my shelf.

The Audit Committee: Performing Corporate Governanceby Laura F. Spira argues that the audit committee is an arena where members can form and strengthen shifting and fragmentary networks with each other and with the external auditors.

How Governments Privatize: the Politics of Divestment in the United States and Germany by Mark Cassell argues that privatization must be understood as a political and administrative puzzle rather than simply an exercise in economic efficiency. He studies two successful divestment agencies, the U.S. Resolution Trust Corporation and the German Treuhandanstalt. 0878408797 (case : alk. paper) (American governance and public policy series: American governance and public policy.

Transformational Boards by Byron Tweeten offers an engagement framework for board leadership designed to help boards lead their organizations through times of change.

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