April 2005

Majority Vote on Move

Lowe’s and Dillard’s are likely to allow shareholders to remove Boot out directors who fail to win a majority of shareholder votes. The companies agreed to make the change after the United Brotherhood of Carpenters withdraw shareholder resolutions seeking the new standard. BusinessWeek reports Dillard’s is expected to seek board approval on May 21. Lowe’s is expected to put the policy to a shareholder vote in May, 2006. (The Proxy Is Mightier Than Ever, 5/2/05)

At Marathon Oil, 52% voted for majority elections, 49.5% voted in favor at MeadWestwaco, 42% at Capital One Financial and 30% at Paccar. (ISS Friday Report, 4/29/05)

On a different majority vote issue, seeking to eliminate supermajority voting requirements for certain corporate matters, Lockheed Martin shareholders voted 52% in favor of “Adopt Simple Majority Vote.” The sponsor was John Chevedden. SBC shareholders voted 62% in favor, sponsor was Ray T. Chevedden. A similar proposal won a 68% vote at Citigroup on April 19. Boeing faces a similar vote at their May 2 annual meeting.

Which Way Public Funds?

While California’s Governor Arnold Schwarzenegger has pulled back a proposal to outlaw defined benefit plans for new public employees until he can fix the language to allow continued death and disability benefits for safety employees, West Virginia is considering a move in the opposite direction. An editorial in Pensions & Investments, “DB Reprieve, for Now,” notes that West Virginia closed its defined benefit plan for state teachers in 1991 in favor of a defined contribution plan. Now they are considering a shift back. “The West Virginia rationale, as unlikely as it sounds: to save money.”

“An actuary for the West Virginia State Teachers’ Defined Contribution Plan noted that it has a higher cost to employers than that of the defined benefit plan. A switch back to the DB plan for teachers could save the state 3% of payroll a year.” (4/18/05) However, as we have noted, Schwarzenegger’s move isn’t based on saving taxpayers money. It is about gathering campaign contributions, channeling money to those contributors and doing away with the power of public pension funds as advocates of good corporate governance.

CEO Taxpayers for a Day Bankroll Social Security Privitization

Because Social Security tax payments are capped, most financial industry CEOs pay into the system for only a few days. Seven of the 26 researched pay only for one day, according to a report, entitled “Taxpayers for a Day: The Most to Gain, the Least to Lose” from United for a Fair Economy (UFE) and the Institute for America’s Future (IAF).

“The CEO of Charles Schwab, David Pottruck, finished paying his Social Security taxes before the end of the Rose Bowl on January 1st, 2004,” said Scott Klinger, co-director of UFE’s Responsible Wealth project and a co-author of the report. “That’s $87,900 in a few hours. Most Americans pay all year long without ever reaching the annual cap.”

The report examines the pay structures of 26 CEOs of finance industry companies the authors say are involved in backing privatization efforts. Average compensation for the group in 2004 was $17,712,239. Therefore, the average CEO within this group surpassed the $87,900 earnings cap after 4 days on the job, or at the end of the day on January 4th, after which no Social Security tax would be collected.

While 94% of workers effectively pay 12.4% of their annual income, including employer’s contribution, these CEOs paid an average effective rate of 0.16% of their annual income toward Social Security taxes. The average taxpayer pays an effective rate that is more than 201 times the effective rate of the average CEO in this group.

“Taxpayers for a day” included the CEOs of Bear Stearns, Charles Schwab, Goldman Sachs, Lehman Brothers, Morgan Stanley and Wells Fargo/Strong Financial. “As most Americans worry about their ability to pay their taxes by April 15, they should keep in mind that Social Security would be funded and solvent into the next century if the highest-earning 6% of Americans would pay taxes on their full income, just like everyone else,” concluded Klinger.

Meeting Roundup

Kohl’s approved two non-binding proposals; 64% of shares voted were in favor of requiring all directors to stand for re-election each year. A proposal that would require a shareholder vote for “golden parachute” severance agreements that exceed 2.99 times the executive’s pay won approval by a 53% vote. (Kohl’s shareholders vote for more control, Milwaukee Journal Sentinel, 4/27/05)

Shareholder activist John Chevedden reports that a McGraw-Hill (MHP) shareholder proposal by Nick and Emil Rossi to “Redeem or Vote Poison Pill” won with a 72% yes-vote at their annual meeting. It was reported that the directors won only a 62% vote. Thus, the proposal was more popular than the directors themselves. One reason the directors may have drawn so many negative votes was that they ignored the 68% shareholder vote on this topic in 2004.

Schering-Plough shareholders approved a non-binding shareholder proposal from Charles Miller, “Elect Each Director Annually,” asking that the bylaws be amended to provide for directors to be elected annually. The company didn’t announce the specific voting results but said that the matter would be thoroughly considered by the Board given shareholders’ interest in the matter. Another shareholder proposal pertaining to animal testing was withdrawn based on the company’s commitment to engage in an interactive dialogue with People for the Ethical Treatment of Animals (PETA). (PharmaLive, 4/26/05)

R.H. Donnelley shareholders approved a proposal from Nick Rossi, Redeem or Vote Poison Pill, supported by 55%. Two EDS shareholder proposals passed, both with about 87% of the vote. One, by William Steiner, required annual election of directors, and the other, by Nick Rossi, ended the need for a supermajority to pass certain transactions related to asset sales and mergers.

Honeywell International shareholders approved proposals to elect directors for one-year terms and eliminate supermajority voting provisions. (Honeywell shareholders OK changes, Northjersey.com, 4/26/05)

Beyond CALPERS

The Council for Responsible Public Investment produced a report in May 2004, Beyond CalPERS: Shareholder Responsibility at California’s Other Public Pensions: A Cennsus of California’s 1937 Act County Pension Plans. CalPERS has demonstrated that responsible shareowner practices can play an important role in increasing the accountability of corporations to their owner’s social and environmental concerns. This project attempted to get an overview of responsible shareholder practices at the 20 plans that constitute California’s county pension system. “Collectively, these plans hold assets that represent over $56 billion –14% of California’s total public pensions and 60% of all assets not held in the state system.”

The report is well worth a read. Among a few of the preliminary findings are the following:

• Social and/or environmental screening of investments is completely absent, with the exception of one ‘trial’ which is being monitored with great interest.
• Only plans with assets of $3 billion or more maintain proxy voting authority in-house, adhering to formal proxy voting guidelines that average 30 pages in length. All plans smaller than $3 billion outsource proxy voting authority to their investment managers.

Top Issues for CalPERS

CalPERS is more selective this year in choosing its battles, focusing on surging executive pay and requiring majority votes for the election of directors.

Last year, CalPERS took a lot of heat for its stand on auditor independence, voting against directors at 90% of the companies in its portfolio. This year their withholds are down to 22%, according to the Sacramento Bee. They are urging ChevronTexaco Corp. to let shareholders approve golden parachute agreements and they want executive pay tied performance at companies like Lucent Technologies, Weyerhaeuser.

Requiring majority votes for directors is seen by many as fall back to the real issue of allowing shareholders to place nominees on the corporate proxy. However, open access appears to be dead for now and majority vote requirement resolutions are picking up steam. Last year, directors at nine companies were elected with less than 50% of the vote. This year the building trade unions have filed 80 resolutions calling for majority vote. (Boardroom Battleground and CalPERS Gets Choosier About Battles, Sacramento Bee, 4/25/04) Maybe public pension funds, such as CalPERS, should tackle the issue on two fronts by sponsoring legislation in states like California which allow only plurality voting.

Compliance Week reports that “even the Business Roundtable, a staunch opponent of proxy access, is willing to consider supporting a majority vote policy.” The Business Roundtable is working with the American Bar Association Committee to study the issue. “While ensuring that shareholders are able to communicate their positions to directors is vitally important, we also must ensure that this does not become a vehicle for special interests to usurp the board election process.” Additionally, Lowes has reportedly “begun a review of the appropriate process” to transition to majority voting. Shareholders will be given the opportunity to vote on the changes at next year’s meeting. (Companies Leave Door Open To Majority Voting Policies, 4/26/05)

Shareholders will vote on another majority resolution at Safeway’s meeting on 5/25/05.

Newsweek Interviews Webb

Without reform, Hong Kong risks becoming a financial backwater, according to shareholder activist David Webb. 90% of listed companies have 20% blockholders. “Where either a family or a government controls most listed companies, you tend to get abuse in the form of controllers’ engaging in related party transactions, paying themselves excessive salaries as directors and electing independent directors who are not really independent, like old schoolmates [and] golfing buddies.” (Safe Haven? The Slippery Slope, International Edition, 5/2/05)

Weyerhaeuser Meeting Erupts

One attendee called it “the gavel-and-goon show: President/Chairman/CEO Steve Rogel hammering with a gavel to silence anyone that tried to speak, then thick-necked Weyerhaeuser goons going up to anyone being gaveled so as to intimidate them into sitting back down.”

Proponents of resolutions were reportedly the only speakers allowed from the floor and they were tightly controlled. No clarifying questions were taken regarding items up for a vote, and no questions from the floor were allowed during the 15-minute so-called Q&A period, not even points of order (which, by Roberts Rules, take precedent over nearly everything).

The testiness began when David Ortman of the Northwest Corporate Accountability Project, presenting a resolution on Weyerhaeuser’s purchase of federal timber, said he wanted to address other subjects as well. Rogel told him to limit his comments to the resolution.

We understand a great many written questions supposedly submitted by shareholders were apparently ignored, although were are told the company told a Business Week reporter that only 8 had been unanswered. Bruce Herbert, of Newground Social Investment, attempted to raise a question from the floor was physically removed from the room. Then the room erupted, with many shareholders wanting to raise questions, and the meeting was abruptly adjourned without announcing voting results.

Several wanted to talk about a dispute between Weyerhaeuser and the Haida Nation in British Columbia who want more control over the ancient forests off the coast of Vancouver. Sandy McDade, senior vice president of the company’s Canada operations, said these issues are matters between the Haida Nation and the B.C. government.

Weyerhaeuser reported first-quarter net income of $239 million, or 98 cents a share, up from $121 million, or 54 cents a share, a year ago. Revenues rose 10 percent to $5.5 billion. It also increased the quarterly common-stock dividend by 10 cents a share to 50 cents. Weyerhaeuser stock fell $1.42 a share, to $64, on a day when the markets overall were up. A shareholder resolution calling on Weyerhaeuser to record stock options as expenses was approved by 68 percent of the votes cast. (Shouting drowns out positive Weyerhaeuser report, The Seattle Post Intelligencer. Protesters cut into timber meeting, Tacoma News Tribune, 4/22/05. Managers to Owners: Shut Up, NYTimes, 4/24/05) Weyerhaeuser uses the same law firm as Boeing, Perkins Coie. We can’t help wondering if their May 2 annual meeting in Chicago will be similar.

Majority at Citigroup 42%

According to The Friday Report (4/21/05), an ISS publication, a majority-elections proposal received 42% of the votes cast at the company’s April 19 meeting, according to Shelley Drapkin of the company’s legal department.

Another proposal that gained significant support from Citigroup’s investors was one that seeks to eliminate the company’s supermajority voting requirements for certain corporate matters. That proposal, filed by a Chevedden family trust, received 69% support. John tells me this topic won a 75% yes-vote average at 7 major companies in 2004 and that theCouncil of Institutional Investors formally recommends adoption of this proposal topic. A shareholder proposal that urged the company to prohibit its chairman from taking on management duties, titles or responsibilities was backed by 30% two executive compensation proposals received between 6% and 7% support. A proposal urging Citigroup to prepare a report on its political contributions won 8.7%.

AFSCME to Vote No

According to The Friday Report (4/21/05), an ISS publication, the AFSCME Employees Pension Fund announced will withhold votes from corporate directors at 11 companies during annual shareholder meetings. We intend to send a message to those directors who are not responsive to the needs of shareholders–if you are not doing your job as a board member by representing the interests of investors, you will not get our vote,” Gerald McEntee, chair of the AFSCME pension plan, said in an April 20 statement.

McEntee added, “Its good practice for institutional investors to disclose their no votes when directors are failing shareholders. And going forward we are putting company directors on notice that they will be the focus of our corporate governance efforts. ”

Companies with directors targeted by the AFSCME Pension Plan include: Honeywell (NYSE: HON), Cendant (NYSE: CD), VF Corp. (NYSE: VFC), General Electric (NYSE: GE), Kohls Corp. (NYSE: KSS), Colgate-Palmolive (NYSE: CL), Union Pacific (NYSE: UNP), Qwest (NYSE: Q), Hilton Hotel Corp. (NYSE: HLT), Home Depot (NYSE: HD), and Lowes Companies (NYSE: LOW). (press release, 04/20/05)

Oxley Tops Jet Set

Michael Oxley, a U.S. representative from Ohio best known as one of the authors of the Sarbanes-Oxley law promoting good corporate governance is the most frequent user of company jets among all 535 members of Congress, with at least 41 flights provided by corporations during the past two years. Other high users are House Majority Whip Roy Blunt, Senate Minority Leader Harry Reid of Nevada, the only Democrat in the top 10, Republican Representative Don Young, and House Majority Leader Tom DeLay.

Lawmakers are required to reimburse the companies from their campaign accounts or political action committees at the cost of a first-class airline ticket, but there is a big difference between the cost of ticket and the cost of a private jet, some of which are equipped with showers and exercise bikes.

In the past two years, lawmakers and their staffs reimbursed companies $2.2 million for 1,346 trips on private jets through their political-action and campaign committees, according to an analysis of campaign-finance disclosures by Washington-based PoliticalMoneyLine. (U.S. Congress, Led By Oxley, Flies in Style on Corporate Jets, Bloomberg, 4/21/05)

AIG Tops CalPERS Focus List of Poor Performers:
Weyerhaeuser to Block Shareholder Questions

American International Group (AIG) tops the list following allegations of widespread accounting fraud and other corruption that cost CalPERS more than $240 million in losses. Also on the list are AT&T, Delphi, Novell, and Weyerhaeuser.

“These five companies are now on our radar screen for their poor corporate governance and in many cases poor performance that has economically damaged shareowners,” said Rob Feckner, President of the CalPERS Board. “We will press for needed reforms to restore long-term profitability and investor confidence.”

CalPERS’ Focus List is selected from the pension fund’s investments in more than 1,800 U.S. corporations, and is based on the companies’ long-term stock performance, corporate governance practices, and an economic value-added (EVA ®) evaluation. AIG made CalPERS’ list after its stock dropped more than 21% in the one year period ended March 31, 2005, and investigations began into accounting misstatements, bid-rigging and the use of questionable insurance products.

“Potential fraud and corruption at AIG have cost working families millions of dollars and threatened the security of their pensions,” said Charles Valdes, CalPERS Investment Committee Chair. “We are going to do everything in our power to seek corporate governance improvements to prevent further economic damage. A good start for AIG would be to strengthen the independence of its board.”

The pension fund filed a shareowner proposal requiring an independent Chairperson at AIG and at least two-thirds of the Board be independent directors. While AIG has recently appointed Frank G. Zarb, as Chairman of the Board and Martin J. Sullivan as CEO, CalPERS’ proposal would require a bylaw change to ensure that these changes are permanent.

AT&T is on CalPERS’ list despite SBC’s acquisition announcement to acquire the company earlier this year. The pension fund believes the company and its directors warrant greater attention after change in control agreements were approved that could pay out $41 million in cash to executives and additional millions on the immediate vesting of stock options and restricted stock.

“These severance payouts are obscene,” said Valdes. “AT&T’s leaders ran this company into the ground, sold it, and were the architects of compensation plans that will pay many of them millions. CalPERS will strongly consider withholding support for these AT&T directors should they land on the SBC Board or other corporate boards to prevent a repeat of the egregious AT&T severance payouts.”

AT&T’s stock price is down more than 74% for the five-year period ended March 31. A shareowner proposal filed by CalPERS at AT&T’s 2005 annual meeting seeks to require shareowner approval of any severance payout that exceeds 2.99 times the sum of the executive’s base salary and bonus.

CalPERS elevated Novell from its 2004 Monitoring List to its Focus List after the Company’s stock price fell 47% during the one-year period ended March 31, and Novell failed to design a true performance-based executive compensation plan tied to operational performance following months of negotiations with the pension fund.

CalPERS officials believe the Company’s current plan fails to use meaningful operational or capital metrics consistently across top management. Specifically, the plan relies upon weak premium priced options, does not include multiple performance metrics consistent with long-term sustainable operating performance and fails to establish real vesting hurdles.

Delphi and Weyerhaeuser made the list because of their poor response to multiple shareowner proposals that have been approved by shareowners but not implemented by their Boards. CalPERS also put Delphi on the list because the company overstated cash flow from operations by $200 million in 2000 and pretax-income by $61 million in 2001, significant executive turnover, and is the focus of investigations by the Securities and Exchange Commission and FBI.

Proposals to declassify the Delphi Board and change to annual director elections have passed for the last four years, and proposals to redeem the Company’s poison pill have passed for the last five years. Similar proposals to declassify the Weyerhaeuser Board were approved by a majority of shareowners in 2000, 2002 and 2003.

“These directors sat on their hands and ignored the wishes of their owners,” said Feckner.  “They should immediately declassify consistent with the demands of their shareowners.”

CalPERS has filed a shareowner proposal this year seeking to amend Delphi’s bylaws that would ban any current or former director from being re-elected if the director opposed declassifying the Board following last year’s annual meeting. The pension fund has also filed a proposal to declassify the Weyerhaeuser Board at its April 21 annual meeting. (CalPERS press release, 4/20/05)

According to a news item in SocialFunds.com, Weyerhaeuser plans to screen questions at its annual meeting. Damon Silvers, associate general counsel for the AFL-CIO, expressed his concern to Mr. Rogel, the CEO and Chair. “The AFL-CIO urges you to conduct the annual meeting of Weyerhaeuser in a manner consistent with your fiduciary duty to protect the informed exercise of your shareholders’ governance rights,” Mr. Silvers wrote. “In our view that includes protecting your shareholders’ right to speak candidly and without management pre-approval to each other and to the board of Weyerhaeuser at the company’s annual meeting.” (Weyerhaeuser To Screen Shareholder Questions at Annual Meeting Tomorrow, 4/20/05)

I contacted Weyerhaeuser and asked for the company’s rationale for denying owners the right to question board members without prescreening by management but got no response. The “Focus” that CalPERS brings should be welcomed by all shareholders. I hope Weyerhaeuser’s apparent shift to an almost fully staged meeting is not a trend.

Become a Certified Director

The UCLA Anderson School of Management is hosting the Director Training and Certification Program on May 18-20, 2005.  Designed for executives, and officers of private and public companies, the program covers every aspect of being a successful corporate director, including SEC regulations, FASB considerations, NYSE rules, and current best practices in corporate governance.

Directors who complete this course and pass a written examination become “certified directors” and may be eligible for lower rates on D&O insurance. This program is ISS accredited; attendance may increase your ISS governance quotient. For more information contact: 310-825-2001,execed@anderson.ucla.edu.

CalPERS Expands Eligible Markets

CalPERS added Argentina, Sri Lanka, Thailand, and Turkey to its list of permissible emerging equity markets based on a report from pension consultant Wilshire Associates. Wilshire reviewed financial market factors of 27 emerging markets including political stability, transparency, and labor practices. Of 27 countries reviewed, 12 improved their scores, 11 had lower scores, and 4 remain the same. CalPERS, which had approximately $3.9 billion invested in emerging markets at February 28, will not permit equity investments in Colombia, China, Egypt, Morocco, Pakistan, Russia, Venezuela, and Indonesia. (Press Release, 4/18/05)

I continue to believe CalPERS should not entirely write off emerging markets based on such rankings but should combine them with rankings of the corporate governance of individual companies. Meanwhile, CalSTRS is searching for up to six active equity managers to invest about 10% of its international equity portfolio, approximately $3 billion, in emerging markets.

Two Systems of Ownership: Two Types of Fraud

In his recent paper, A Theory of Corporate Scandals: Why the U.S. and Europe Differ, John C. Coffee Jr. of Columbia University Law School threorizes that dispersed ownership creates managerial incentives to manipulate income, while concentrated ownership invites the low-visibility extraction of private benefits.

Enron and WorldCom are the iconic examples of fraud in dispersed ownership regimes typical of the US and UK. Governance protections that work in one system may fail in the other. The U.S./U.K. system of dispersed ownership is vulnerable to gatekeepers not detecting inflated earnings, and concentrated ownership systems fail to the extent that gatekeepers miss (or at least fail to report) the expropriation of private benefits. European and emerging market are more prone to private benefits being siphoned off to controlling shareholders through related party transactions.

In companies with dispersed ownership, auditors should report to an independent audit committee. In companies where there is concentrated ownership, the auditor should be selected by and should report to minority shareholders.

Vermont Senator Challenges Funds

Sen. Mark Shepard, R-Bennington introduced a joint Senate resolution, JRS 26, requiring approval of the Legislature before pension boards make decisions based on criteria other than those intended to maximize the rate of pension returns. He is concerned with a recent decision by trustees of the Vermont State Teachers’ Retirement System to make it harder for investment firms that support the privatization of Social Security to manage money in the teachers’ fund.

Shepard said the trustees’ resolution was a political statement because it undermines President George W. Bush’s Social Security reforms. Vermont State Treasurer Jeb Spaulding, a member of the trustees who voted in favor of the resolution, disagreed. He said in a statement the vote was “entirely appropriate” and that the pension plan, which provides retirement benefits to roughly 3,400 former Vermont educators, is well-managed and will make secure retirements possible for members. “If all else were equal, why wouldn’t we consider their involvement in an effort we believe will undermine retirement security for the members and beneficiaries of our retirement plan?” (Control of state pensions at issue, Bennington Banner, 4/18/05)

Downsizing the CEO

According to Business Week,”directors, auditors, and lawyers are more powerful than ever. That shift has fundamentally altered relations between CEOs and the advisers they depend on. At their best, these supposed guardians of shareholder value, chosen for their ability to complement the CEO and provide specific areas of expertise, were trusted advisers. At their worst, they were little more than bag carriers and sycophants. Either way, these advisers — who were always supposed to work for the shareholders, not the CEO — usually exercised their power as watchdogs only in moments of genuine crisis. But now the chumminess and banter have given way to a more adversarial attitude…Even CEOs who don’t lose their jobs are finding that their ability to impose their will, whether it’s in setting strategy or hiring a successor, has been severely curtailed.”

David Henry, Mike France and Louis Lavelle argue “the new rules may initially go too far and create their own distinctive set of problems.” Candid conversarions are gone. CEOs are being micromanaged by boards and now seek safe strategies rather than risk confrontations. Pay for performance is the new standard. Board independence makes it harder for CEOs to put together boards that compensate for their weaknesses. CEOs are being bullied by boards, auditors and attorneys. “The downsizing of the CEO has led, to a certain extent, to the supersizing of the advisers. That’s not necessarily a cure for everything that ails Corporate America. It is a clue that successful CEOs will have to be consensus builders in the future. And should be a warning to CEOs everywhere: The age of the absolute corporate monarch, such as AIG’s Greenberg, is over.” (The Boss On The Sidelines, 4/25/05)

Really? CEOs still seem to have the power to block the SEC from finalizing its “equal access rule.” True, they are less likely to be out and out crooks and that’s certainly a step in the right direction. See Here It Comes: The Sarbanes-Oxley Backlash in the New York Times, 4/17/05, which notes the backlash is striking, “given that it comes against a backdrop of continuing revelations of potential fraud, criminal prosecution of fraud and convictions on fraud charges.”

AFSCME Keeps Pressure on AIG

Eliot Spitzer, recently attacked Maurice (Hank) Greenberg, the ousted CEO of American International Group (AIG), on national television, saying “the evidence is overwhelming” that a series of transactions completed by the company under Greenberg’s watch constituted “fraud,” and that Greenberg could face criminal charges. His transfer of more than $2 billion worth of AIG shares to his wife three days before Greenberg stepped down as AIG’s chief executive probably would not survive a court challenge.

On April 15th the American Federation of State, County and Municipal Employees Pension Plan (the “Plan”) urged the SEC not to grant relief to the American International Group (“AIG”) if it seeks to use Form S-3, commonly referred to as shelf registration, to register new securities. In light of the recent financial scandal and the delay in filing its 10-K disclosure, Gerald W. McEntee — the AFSCME Pension Plan chairman — sent a letter to Alan Beller director, Division of Corporation Finance at the SEC, urging them to require AIG to use the longer, more complete disclosures in Form S-1 and not the abbreviated shelf registration filing.

“In light of AIG’s admitted past disclosure deficiencies, it is particularly important for purchasers of securities offered by AIG in any offering in the next year to have the more complete disclosure provided pursuant to Form S-1. … Due diligence takes on heightened importance with respect to AIG because of the fluid nature of the situation and the possibility that more improper accounting or other problems will be uncovered in the course of AIG’s own investigation or those being conducted by regulators.” “The company has lost more than 28 percent of its value in the past two months, and has already missed its required annual filing deadline twice,” said McEntee.

AIG had announced that the filing of its 2004 Form 10-K would be delayed beyond the March 31, 2005, extended due date because the company is continuing to review its accounting treatment of certain items, including transactions that are the subject of investigations by the Commission and the Office of the Attorney General for the state of New York. With limited exceptions, a registrant’s failure to file in a timely manner any periodic report, including a Form 10-K, makes the registrant ineligible to use Form S-3 to register securities for a period of one year after the due date for the report. (Pension to SEC: Tell AIG File Full Form, Reuters, 4/15/05)

Speaking of AFSCME, the March 2005 edition of Institutional Investor has an interesting article on Richard Ferlauto, who they credit as being the driving force behind major governance concessions by Circut City, Marsh & McLennan and Ryder System, as well as getting the SEC to propose its rulemaking that would have allowed shareholders to place their director nominees on a very limited number of corporate proxies. It’s a good little biography of how Ferlauto became one of the top corporate governance innovators.

From growing up in a “moderate Republican” household in an upper-middle-class town in New Jersey and reading The North Will Rise Again,to working for a nonprofit to help displaced tenants, then the Center for Policy Alternatives, Institutional Shareholder Services, and finally joining AFSCME. “My whole life I have been looking for creative ways that markets can be used to generate jobs and economic opportunity and return economic benefits to the community,” he explains. “It’s a social orientation and an economic orientation.” (Labor of Love)