May 2005

Enhancing Decision-Making Symmetry by Endorsing All Powers to the Full Board

by Dr. Darlene M. Andert CMC CFM

The theme of the 6th International Conference for Corporate Governancewas “Making Corporate Governance Decisions that Work,” which is an important topic the future of corporate governance. Clearly the Disney case, as well as other recent cases, indicates that the same volume and timing of information may vary between non-independent and independent Board members. Yet, to rebalance corporate governance practices, the US Sarbanes-Oxley Act granted autonomy to the Audit Committee. Although this directive may elevate the independent Director’s knowledge and control, an unintended side-effect is information asymmetry between Board members and the dilution of full-Board decision-making synergies.

In contrast, Section 8.01(b) of the United States Model Business Corporation Act (the unifying construct for various state-authored statutes) provides that “all corporate powers shall be exercised by and under the authority of, and the business and affairs of the corporation managed under the direction of, the board of directors” (p. 8-5). This Act structures ALL POWERS as the domain of the “board of directors” as a whole body and not the domain of an individual member or an autonomous committee. The Act further describes “actions without meetings” (8-24) and the “voting and quorum” (8-27) rights which when applied equally to ALL Board members result in a non-hierarchical, one-vote-for-one-member collective body. It can easily be concluded that exercising all powers by the full Board supports information fluidity and enhances collective decision-making synergies.

The needed paradigm of corporate governance re-structuring should provide for a rebalancing between the three distinct powers: the Board providing oversight and representing shareholders, Administrationproviding operations and serving customers and stakeholders, andRegulatory agencies providing legislative enactment and serving society as a whole. This structural schema, challenges the wisdom of dual roles for members of the Board (i.e. CEO/Chairperson) as well as the use of private-autonomous Board committees. The compelling question is “Will future paradigms of corporate governance complete the separation of powers between operational roles and oversight roles that are currently causing two-tier-Board-syndrome and information asymmetry”?

Most people know the quote from Lord Acton that “power tends to corrupt, and absolute power corrupts absolutely.” As democracy divides power and control between the Judicial, Legislative, and Executive branches — with each having separated and distinct autonomy, shouldn’t future restructuring efforts divide the distinct bodies but unite the full Board and provide for the symmetry of information and the maximization of decision-making synergies in the Boardroom? After all, knowledge is power and the key asset to any decision-making body.

Dr. Darlene Andert serves as the Director for the International Center for Responsible Corporate Governance at Florida Gulf Coast University [ (239)590-7322] and President of Andert Governance Corporation [(239)549-7766].

Alaska to Move From DB to DC: Kennedy Has Better Strategy

The Alaska State House approved a bill that would create a defined contribution plan for new employees to the Public Employees’ Retirement System and Teachers’ Retirement System, which has been reported to face a $5.7 billion underfunded liability that threatens the benefits of those currently in the system.

When the Senate introduced the retirement bill, it immediately put the House on the defensive by taking a priority House bill hostage: They slapped a contingency clause on the House’s $70 million increase to K-12 education, saying if the House doesn’t approve the Senate’s retirement bill, the education money gets cut by $38 million.

The final compromise added death and disability benefits, increased health benefits and increased the employer’s contributions to individuals’ retirement accounts. In addition, it creates a new Alaska Retirement Management Board that will advise policymakers on solutions to the underfunded status of the retirement systems. Lawmakers handily ignored a state law requiring analysis of the long-term and short-term costs to the state and effect on the state’s retirement funds of any changes to the retirement system. (Tweaks to retirement plan underscore flawed process, Juneau Empire, 5/25/05)

Will California take the same route next June? A far better strategy is one advocated by Joseph P. Kennedy II; give average working people access to the investment expertise of public pension funds. Only the rich can legally participate in many of the best-performing funds. But when these alternative investments are part of a diversified portfolio, they can significantly boost performance and actually protect investors from downswings in more traditional asset classes. CalPERS has earned an average of 9.1% for the 3 year period that ended 2/28/05.

Mutual funds won’t like the competition and CalPERS would have to explore the cost of additional accounting and oversight duties but it would likely be able to provide Californians superior and stable long-term results. Giving everyone a greater stake in the fund may also protect it against attempts to destroy it. (A populist approach to pension funds, Boston Globe, 5/23/05)

Pressure Builds on ExxonMobil 

Shareholders gave record high voting support today to a shareholder resolution seeking greater analysis and disclosure from ExxonMobil about the financial impacts posed by global climate change. A resolution requesting that the company’s board of directors undertake a comprehensive review on how it will meet the greenhouse gas reductions targets in countries participating in the Kyoto Protocol won support from 28.3% of shares voted.

The measure was backed by CalPERS and CalSTRS, as well as Institutional Shareholder Services (ISS). The highest previous vote on a climate change resolution with ExxonMobil was 22.2% at the company’s 2003 annual meeting.

Other oil and gas companies are taking a wide range of actions to reduce their financial exposure and improve their competitive positioning on the climate change issue. Anadarko Petroleum, Apache, ChevronTexaco and several other leading U.S. oil and gas companies have agreed to such steps as: measuring and disclosing greenhouse gas emissions and setting reduction targets; increasing investments in low- and no-carbon energy technologies, integrating climate risk and carbon costs into capital allocation decision making; and assigning boards direct responsibility to oversee climate change corporate strategies.

Two other climate change resolutions were voted on at today’s meeting. A resolution requesting that the company explain the scientific basis for its ongoing denial about human activities contributing to global warming received 10.3% of the vote. A resolution calling for more energy and oil industry expertise among independent members of the board of directors received 4.1% support. (ExxonMobil Investors Give Record High Support to Climate Change Resolution, 05/25/2005, CSRwire)

Chevedden Report

58% vote at Edison International (EIX)
Subjecting golden parachutes to a shareholder vote passed at EIX with 58% of the vote as reported at the annual meeting.

60% vote at Mattel
Subjecting golden parachutes to a shareholder vote passed at Mattel with approximately 60% of the vote. John Chevedden was the proponent for both of these proposals.

Enforcement Action

EBSA, which enforces the Employee Retirement Income Security Act (ERISA), closed 4,399 civil investigations in FY 2004, with nearly 7 in 10 of those producing corrected ERISA violations. Criminal investigations led to the indictment of 121 people in 205 cases and the recovery of $5.6 million. The agency prosecuted wrongdoers under criminal statutes governing theft or embezzlement from employee benefit plans, lying on ERISA-required documents, as well as offering, accepting, or soliciting a bribe in order to influence the operations of an employee benefit plan. EBSA listed six key fiduciary violations:

  • failing to operate a plan prudently and for the exclusive benefit of participants;
  • using plan assets to benefit certain related parties;
  • failing to value plan assets properly at their current fair market value or to hold assets in trust;
  • failing to make benefit payments due under the terms of the plan;
  • taking adverse action against an individual for exercising his or her rights against the plan;
  • failing to offer continuing group health-care coverage for at least 18 months after a worker leaves the company. (Compliance Reporting: Staying inside the Lines,

ISS Acquires Deminor

Institutional Shareholder Services (ISS), the world’s leading provider of proxy voting and corporate governance solutions, today announced that Deminor International, the well-known minority shareholder advocacy firm based in Brussels has sold its corporate governance unit to ISS. The combined company will form the foundation of ISS Europe, headquartered in Brussels with offices in Paris and Amsterdam. The firm estimates the market size for corporate governance and proxy voting services in Europe to be almost $100 million, about 26% of the world’s total. (PRNewswire, 5/25/05)

Shareholders get another Tool Via Yahoo! and ISS

Institutional investors, who are required to vote their shares in the best interest of investors or plan beneficiaries often subscribe to services, such as those provided by The Corporate LibraryGlass Lewis, and Institutional Shareholder Services for proxy advice. Mark Latham’s Corporate Monitoring Project argues that many individual shareholders don’t take the time necessary to review proxy materials and should request that boards hire a proxy advisor, chosen by shareowner vote. (see his current proposal at Metro One Telecommunications) Alternatively, Latham argues, systems are needed which facilitate their ability to vote by brand reputation. (see Vote Your Stock)

The Project’s recent newsletter announced that will soon offer individuals free email notification of voting decisions by their preferred institutions. Directed by Andrew Eggers, a PhD student in Harvard’s Department of Government who was inspired by Latham’s writings, it will enable individual investors to conveniently piggyback their stock voting decisions on those of institutional investors with trusted reputations. If you’re interested in being a Beta tester, send an email toAndrew Eggers.

In the meantime a joint project of Yahoo! and ISS has taken a small step in the direction advocated by Latham. It won’t provide advice on how to vote but it may influence how shareholders buy or sell stocks. It might also provoke shareholders to pay more attention to director elections and proxy resolutions because they will now have free access to a company’sCorporate Governance Quotient (CGQ®) or score in terms of governance and best practices in comparison with both its peers and the broad market.

A significant correlation between poor corporate governance practices and poor stock performance has been recognized for several years. For example, as reported by BusinessWeek (The Big Picture, 5/23/05, page 13), “poorly governed companies are far more likely than highly ranked ones to be sued by investors within 6 to 18 months of being rated.” Whereas only 5.7% and 6% of those rated A or B were sued, 14.5% ranked C, 24.7% ranked D and 51.2% of those ranked F were sued.

Now we have a tool at Yahoo Finance to look up ratings before we invest and to research stocks already in our portfolios. Apple Computer is one of my better performing stocks, so I type in AAPL as the company symbol, hit “go,” scroll down toward the bottom, and click on the “Company Profile” link. That brings up a “Corporate Governance” section that reports the following:

Apple Computer Inc’s Corporate Governance Quotient (CGQ®) as of 1-May-05 is better than 60.1% of S&P 500 companies and 92.7% of Technology Hardware & Equipment companies.

One of my less stellar stocks is ThermoGenesis (KOOL). Using the same process I found the following:

Thermogenesis’ Corporate Governance Quotient (CGQ®) as of 1-May-05 is better than 56.4% of CGQ Universe companies and 41.8% of Technology Hardware & Equipment companies.

Knowing a little more about Thermogenisis might now prompt me to sell the stock, make suggestions on how they can improve their corporate governance, or just review their next proxy more carefully. It is certainly a step in the right direction and should be a welcome addition to the shareholder’s toolbox.

Stybel Joins Newtwork

Dr. Laurence J. Stybel joined the Corporate Governance Network. We encourage readers to consider his services. On May 23, 2005, he will address 115 governance thought leaders from around the world at the Bentley College Conference on Ethics and Risk Management in a Global Environment.  His topic is “Strategic Options When Boards Select Board Self Evaluation Programs.”  Dr. Stybel is co-founder of Board Options, Inc.  For a copy of his speech, email

From a Whisper to a Firestorm

That’s the title of an article by Mike McCurry and Randy Tatein in the current edition of Directors & Boards. The article asks, “How ready are you as a board to respond to the revenge-laced rhetoric promoted by activist organizations and shareholder-revolt leaders?” Interest groups are partnering with public pension funds and, working together, are gaining traction. Why?

With few openings on the political front (Republican lock on Congress), liberal activists have shifted focus from K Street to Wall Street. Epic corporate scandals have made it easier to win over skeptical investors. Finally, the internet enables activists to organize quickly. Their advice?

  • Monitor the internet, so that you can respond quickly.
  • Build relationships with your shareholders (and, I would add, those non-governmental organizations they are teaming up with)
  • Speak bilingually. You need specifics to address both financial and ethical issues; “shareholder value as well as shareholder values.”

In addition to subscribing to their excellent print publication, we recommend signing up for e-Briefing, “a free monthly update for corporate board directors, delivered directly to your email box.”

Petition Seeks to Improve Arbitration Process

Public customers of securities brokerage firms are required to agree to arbitrate disputes using specified forums. Drawing on 30 years of experience serving as an NASD arbitrator and as legal counsel for either claimants or respondents, Les Greenberg recently filed a Petition for Rulemaking (File No. 4-502) that seeks to level the playing field. The Petition requests the creation of rules designed to:

  1. specifically permit arbitration panel members, should they elect to do so, to conduct legal research, or, in the alternative, forbid Self-Regulatory Organization (“SRO”) sponsored arbitration forums from restricting arbitrators from conducting legal research;
  2. abolish the requirement that a securities industry arbitrator be assigned to each three person panel hearing customer disputes or, in the alternative, require that information presented to a panel of arbitrators by a securities industry arbitrator be revealed to the parties during open hearing;
  3. require SROs to conduct continuing evaluations of the ability of every arbitrator on their panels to perform his/her duties, including, but not limited to mandatory peer evaluations;
  4. require SROs to train arbitrators in applicable law;
  5. require SROs to reveal in pre-dispute arbitration agreements whether their arbitrators are required to follow the law in their decision-making process, the training of their arbitrators in the law, and their process, if any, to evaluate their arbitrators on a continuing basis; and,
  6. require the SEC’s Division of Market Regulation to specifically oversee SROs to determine whether they are in compliance with rules adopted pursuant to items (1) through (5), inclusive.

We hope to be able to report the SEC has introduced such a rule within the next few months. However, that is unlikely to happen unless dozens of comments are sent to the SEC supporting the petition. Email your comments directly to the SEC at:  The subject line of the email must include “SEC File No. 4-502.”  Your comments will be posted to the SEC site.

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Metro One to Vote on Proxy Advisor Proposal

Shareowners of Metro One Telecommunications [ticker: INFO] are now voting on Mark Latham’s Proxy Advisor proposal, which would let shareowners vote to choose a proxy advisory firm paid with company funds. The SEC did not concur with management’s arguments for excluding the proposal from the company proxy. Latham will attend the Metro One annual general meeting near Portland Oregon on June 16 to present this resolution. The same proposal was supported by over 20% of shareowners voting on Oregon Steel’s proxy in April 2004.

Along with majority vote requirements for electing directors, this is one of the most important types of proposals to strengthen shareholder rights. For more information, subscribe to the Corporate Monitoring Project Newsletter. Also read Latham’s innovative paper, Turbo Democracy: A New Business Model for Public-Interest Journalism.

US to Lag in Future SRI

Mercer Investment Consulting recently conducted a study which shows that US investment managers lag behind those in Asia, Australia, Europe and Canada in their belief that socially responsible investing will become the norm within a decade. Of the 195 managers questioned, 28% of those from Asia, 44% from Australia and 42% from Europe feel social and economic performance indicators will be mainstream in five years, compared with 11% of US investment managers. 

Alyson Slater, associate director of the Global Reporting Initiative, says that most US investment managers consider positive returns their only social responsibility, an idea that is fueled by corporate America’s preference for prescribed, regulated and mandated reporting. Conversely, “the business culture [in Europe], in terms of sustainability reporting, favors principles-based reporting and the voluntary, flexible approach,” he says. According to GRI, which provides sustainability guidelines for companies active in the global marketplace, of the 661 registered participants, almost half are European while only 70 are U.S.-based.

WCFCG Conference Success

Making Corporate Governance Decisions That Work was the theme of the May 12-13, 2005 conference organized by the World Council for Corporate Governance (London) in association with the Centre for Corporate Governance (New Delhi). James McRitchie, publisher of CorpGov.Net, was among the many featured speakers and presented a paper reflecting the conference’s main theme, Making Corporate Governance Decisions That Work for Whom? A book containing most of the papers presented is available by contacting

Indian companies won five of the eight Golden Peacock Awards from the World Council for Corporate Governance for their outstanding performance. Announcing the awards, Robert Hiscox, the Council’s Director Communications, said the seven companies were chosen from out of 225 nominated. The global award for corporate governance went to Scottish Power, a UK company ranked 3rd by the FTSE / ISS corporate governance index.

The global award for Emerging Economies went to the Hong Kong Exchange. The global award for Corporate Social Responsibility was received by BT Group, based in the UK. Pritish Nandy Communications PTV, the first publicly traded motion picture company in India, received the award in the category of emerging economy in the private sector while the Oil and Natural Gas Company (ONGC), one of the largest in the world, was selected for the award for the public sector in India. The National Thermal Power Corporation, the largest power company in India, received the Public Sector award for an emerging economy.

ITC, one of India’s foremost private sector companies and is moving from tobacco to paper, food, hotel, agricultural exports and forestry to apparel and LIC were chosen for the Golden Peacock Awards in the category of Corporate Social Responsibility in Emerging Economies. Ola Ullsten, former prime minister of Sweden and Chairman of the World Council for Corporate Governance and Madhav Mehra, President of World Council for Corporate Governance jointly presented the awards to the winners at the end of the conference.

I expect even more applicants for the Golden Peacock awards at next year’s conference, along with greater attendance by corporations and institutional investors who share WCFCG’s goals of improving the quality of corporate governance practices worldwide by promoting greater transparency, integrity, probity, accountability, and responsibility.

Majority Election Proposals Gaining

The Friday Report by ISS (5/20) notes that as this year’s proxy season approaches its midway point, “the two issues driving the agenda this season are board-related: changing from a plurality to a majority standard for electing directors, and declassifying boards to provide for annual elections.” With results available for 36 firms, the average proposal has won the support of 42% of votes cast, compared with an average support level of 12% for 12 proposals last year.

The highest support levels were posted at Altera (59%) and Advanced Micro Devices (58%), and the lowest (19%) at and Ecolab (22%). The issue is on the agenda at Safeway (on 5/25), and at Home Depot and Hilton Hotels (5/26). In the first half of June, majority elections proposals are slated to be voted on at Albertson’s, Wal-Mart, General Motors, TJX, and Supervalu.

Chevedden Report

Votes this week:

  • Northrop (NOC), simple majority vote, Fred Barthel, 68%.
  • FirstEnergy, simple majority vote, Ray T. Chevedden, 71%.
  • JPMorgan, recoup unearned management bonuses, Ray T. Chevedden, 37%.
  • Alaska Air. We are having trouble getting results for proposals, one of which is sponsored by John Chevedden. Annual election and simple majority vote are expected to exceed 50%.

Votes this month:

The following are Chevedden-affiliated proposals which were taken over by companies and adopted at May 2005 annual meetings:

  • Bristol-Meyers, simple majority vote, Charles Miller’s ’05 proposal superceded by BMY proposal, 85%.
  • Northrop (NOC), declassify, John Chevedden, 97%.
  • Raytheon, declassify, John Chevedden, 85%.
  • Maytag, declassify, Ray T. Chevedden, 86%.
  • The Sabre Group (TSG), declassify, John Chevedden – TSG said it obtained the required votes.
  • Maytag, poison pill, Nick Rossi – The Maytag pill expiration date was brought forward to 12-05.

Top 50 Plaintiffs’ Law Firms

Securities Class Action Services (SCAS), owned by ISS, released its annual list of the top 50 plaintiffs’ law firms ranked by the total dollar amount of final securities class action settlements occurring in 2004 in which the law firms served as lead or co-lead counsel.

The top five law firms on this year’s “SCAS 50″ list include Bernstein Litowitz Berger & Grossman, Barrack, Rodos & Bacine, Milberg Weiss Bershad & Schulman, Chitwood & Harley and Berman DeValerio Pease Tabacco Burt & Pucillo. …”Securities class action settlement amounts reached record highs in 2004, at more than $5.98 billion,” said Bruce Carton, Vice President of ISS’s Securities Class Action Services.

“The firms on our ‘SCAS 50’ list were the leaders in obtaining these recoveries, with one firm, Bernstein Litowitz Berger & Grossman, having a hand in more than one-half of last year’s settlement dollars.” Bernstein Litowitz Berger & Grossman also achieved the highest average settlement amount among law firms with at least 5 settlements, at $288 million per suit. “The average settlement amount is an important measure because it is an indicator of which law firms are consistently bringing and settling high-impact cases,” said Carton. Carton added that the law firm of Milberg Weiss Bershad & Schulman led all firms with respect to the total number of final settlements, with 43 settlements.

Donohue’s End May Be Near

Without a true coordinated campaign, Union Pacific shareholders withheld 15% of shares voted from Donohue (204 million for v 36 million withheld). Clearly a sign. Will we see shareholder proposals next year asking companies to drop their membership with the US Chamber of Commerce?

The past work of the compensation committee at Union Pacific raises questions about the committees role in setting fair pay rewards. In 2001, Union Pacific’s board approved an incentive pay program that would grant cash and stock at the end of a three-year period. The awards would be granted, the program stated, if the company’s stock traded above $70 for 20 days in a row or if company earnings for the period totaled at least $13.50 a share. In late 2003, it became clear that the company might miss both targets. The compensation committee chose to include the sale proceeds from spinning off the Overnite Corporation in the earnings computation, which in turn put the executives over the top for the cash and stock awards.

What makes this maneuver unusual is that proceeds from a sale are not typically included in earnings. For 2003, Chairman and CEO Richard Davidson, Union Pacific’s chief executive, received $9.5 million in salary, long-term incentive pay and other compensation as well as $4.5 million in restricted stock and 325,000 options. Because the members of the compensation committee have failed in their duty to Union Pacific stockholders as a result of the questionable earnings computation, we will withhold votes from long time directors and compensation committee members Thomas Donohue, Spencer Eccles, and Stephen Rogel. (Recommendation of AFSCME Employees Pension Plan, for more information contact Cheryl Kelly or Tiffany Ricci at 202-429-1145)

Proxy Advisor Proposal at Metro One Telecommunications (INFO) 6/16/05 

“WHEREAS many shareowners lack the time and expertise to make the best voting decisions, yet prefer not to always follow directors’ recommendations, because of possible conflicts of interest;

WHEREAS shareowners have a common interest in obtaining sound independent advice, but often insufficient private interest to justify paying for it individually (the “free-rider” problem);

THEREFORE BE IT RESOLVED that Metro One Telecommunications, Inc. shareowners request the Board of Directors to hire a proxy advisory firm for one year, to be chosen by shareowner vote. Shareowners request the Board to take all necessary steps to enact this resolution in time to hold the vote at the year-2006 shareowner meeting, with the following features:

  • To insulate advisor selection from influence by Company’s management, any proxy advisory firm could put itself on the ballot by paying an entry fee, declaring the price (no more than $8,000) for advisory services for the coming year, and providing the address of a website describing their proposed services and qualifications.
  • The winning candidate would be paid its declared price by the Company, and make advice freely available to all Company shareowners for the subsequent year, on all matters put to a shareowner vote except director elections.  (Advice on director elections is excluded to satisfy SEC rule 14a-8(i)(8)).
  • Performance of the advisory firm would not be policed by Company’s management, but rather by gain or loss of the advisor’s reputation and future business.
  • Brief summary advice could be included in the Company proxy, with references to a website and/or toll-free phone number for more detail.
  • The decision of whether to hire proxy advisory firms in later years would be left open.

Supporting Statement

The proxy advisor would be paid with Company funds to give shareowners an independent professional opinion.  Independence would be further enhanced by having shareowners choose the proxy advisor.  This could also increase competition in the proxy advisory business, because new entrants could earn fees on a company-by-company basis, without covering thousands of companies.

Example of shareowners’ lack of time and expertise: “I tried to read the proxy statement, but I still don’t understand whether the change is shareholder friendly or not.”

Example of mistrust of directors’ recommendations (Harris Poll, September 2003):  “Support for corporate management nominees is also mixed with majorities of shareholders having withheld support from a management nominee.”

The conflicts of interest among managers, directors and shareowners are described in Robert Monks and Nell Minow’s 1996 book Watching the Watchers, along with shareowners’ “free rider” and “rational ignorance” problems.

Articles discussing the company-pay system for proxy advice are on theCorporate Monitoring website.

(Editor’s note: We believe proposals such as the above represent the most effective means to enable intelligent voting by most individuals and small institutional investors.)

Majority Vote Momentum Grows

Proposals won 57% support at Raytheon, 52% at Freeport McMoRan Copper & Gold Inc., 51% at Federal Realty Investment Trust, 46% at Motorola Inc., 45% at Bristol-Myers Squibb Co., 43% at Verizon Communications and 42% at General Growth Properties. (The ISS Friday Report, 5/6/05)

Social Choice for Social Change: Campaign for a New TIAA-CREF

Are You in the TIAA-CREF Retirement System? (If not, you can still help.) Do you want your money to help build housing and businesses in low-income communities? To support socially and environmentally responsible products and services? Spend five minutes to support proposed changes in TIAA-CREF’s socially responsible fund.

In the 1980s, participants lobbied the pension giant TIAA-CREF (TC) for five years to set up a socially responsible fund, the Social Choice Account. Now they are pushing for an improved fund with practices that are becoming standard in socially responsible investing. The effort is endorsed by many activist groups, and individuals like Noam Chomsky, Howard Zinn and Benjamin Barber.

CONTACT TC and ask them to modify the Social Choice Account by:

  1. investing in low-income area community development;
  2. investing in social venture capital for companies pioneering socially and environmentally responsible products and services; and
  3. engaging in socially responsible shareholder advocacy (vote their stock shares to influence corporate behavior).

If you are a TC participant, let them know. Call CEO Herbert Allison at 800-842-2733; 212-490-9000 (ask for him and leave a message with his assistant). You can email him at, but a call has more impact. Once a month, that’s all the campaign asks, to keep up the pressure.

To receive campaign updates (every two to four weeks). to be added to the list. Be part of a national coalition of activist groups that is pushing for TC to be more socially and environmentally responsible in its various investments.

The Chevedden Report

77% yes-vote for shareholder proposal at Baxter’s Chicago meeting May 3
5) Annual Election of Each Director
Sponsor: Charles Miller

66% yes-vote at Boeing
Boeing yes-votes as announced by the Chair of the annual meeting on May 2:
6. Declassify the board 66%
7. Simple majority vote 65%
8. Shareholder committee to address ignored majority votes 29%
9. Always independent board chair 25%
These percentages may be conservative because some votes that were not cast as no-votes were counted as no-votes.

In addition to the 66% yes-vote at Boeing, shareholders spoke volumes in giving only a 71% yes-vote to the 3 directors who had ignored majority shareholder votes on shareholder proposals in 2004. By contrast the one director new to the board received a 93% yes-vote.

Boeing not firing on the corporate governance cylinder “It was said earlier in the meeting that Boeing was firing on all cylinders,” Chevedden said in one of many salvos directed at the board. “Well, (Boeing’s) not firing on the corporate governance cylinder, that’s for sure.”
Source: Missteps dull Boeing’s glow By Tim McLaughlin, Post-Dispatch 05/02/2005

74% yes-vote at CSX for shareholder proposal item 4 on May 5
4 – Adopt Simple Majority Vote
Sponsor: Victor Rossi

41% yes-vote at General Dynamics
Shareholder Vote on Golden Parachute proposal at General Dynamics May 4
41% yes
57% no
Proponent: John Chevedden
This represents a substantial vote of support and this was the first time for this topic on the GD ballot.

52% yes-vote at Sierra Pacific (SRP) on May 2
Topic: Subject Poison pill to shareholder vote
Proponent: Chris Rossi
The 52% is conservative because it includes the broker non-votes as no-votes. Of course the brokers can’t vote on this topic.

85% vote at Raytheon (RTN) on May 4 for a shareholder proposal taken over by management – annual election of each director.

As a shareholder proposal, sponsored by John Chevedden, this topic previously won strong support.
Year Rate of Support
2000 56%
2001 66%
2002 61%
2004 78%

85% vote at Bristol-Myers for shareholder proposal taken over by management. In October 2004 Charles Miller of Great Neck, NY submitted a simple majority vote proposal to Bristol-Myers (BMY). In Dec. 2004 BMY set in motion to submit this topic as a binding management proposal to shareholders.

Then on May 3, 2005 BMY shareholders cast 85% of outstanding shares to approve simple majority vote.

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International Review

Editing the most prestigious academic journal on corporate governance becomes more difficult as the volume of studies and essays produced increases. Yet, Christine Mallin continues to sort through submissions, maintaining the highest quality.

The March 2005 edition of the Corporate Governance: An International Review weighs in at 350 full-size pages. The issue includes an article by Bob Monks that suggests reforms in five areas. It can also be found on his site at See “Corporate Governance – USA – Fall 2004 Reform – The Wrong Way and the Right Way.”

You can also view Audit Committee Independence and Disclosure: choice for financially distressed firms by Joseph V. Carcello, Terry L. Neal andThe Link Between Earnings Timeliness, Earnings Conservatism and Board Composition: evidence from the UK by Wendy Beekes, Peter Pope, Steven Young.

Of course, most of the articles are only available to subscribers or at your library in hardcopy. The Journal explores such diverse topics as A Portrait of Professional Directors: UK Corporate Governance in 2015 to “Insider Ownership Structure and Firm Performance: a productivity perspective study in Taiwan’s electronics industry.”

Ashcroft Group to Provide Corporate Governance Advice

Former Attorney General John Ashcroft is starting a consulting firm, called the Ashcroft Group, with longtime aide David Ayres and prominent Washington lobbyist Juleanna Glover Weiss, a former press secretary to Vice President Dick Cheney. “The Ashcroft Group will represent big companies with big problems,” Weiss said. The firm will advise clients on everything from homeland security and law enforcement to issues involving corporate governance.

Ashcroft considered it a major success that terrorists did not strike inside the United States again on his watch. Will he be able to help companies keep shareholders at bay as well? He will certainly have an inside track to the White House. (Ashcroft to start consulting firm, Columbia Daily Tribune, 5/4/05)

The announcement followed by one day a release by the Business Roundtable of its guides “Committed to Protecting America: CEO Guide to Security Challenges” and “Committed to Protecting America: A Private Sector Crisis Preparedness Guide.” “Just as the federal government is reforming its procedures and testing its security preparedness through exercises such as TOPOFF 3, businesses must revise corporate governance practices and evaluate their crisis plans to address important security issues in this new world,” said Frederick W. Smith, Chairman, President and Chief Executive Officer of FedEx Corporation and Chairman of the Roundtable’s Security Task Force.

Governance Important in Singapore

PricewaterhouseCoopers, the Investment Management Association of Singapore, and the Corporate Governance and Financial Reporting Centre of the National University of Singapore Business School jointly surveyed institutional investors and found that 81% said good corporate governance is an incentive for investment in Singapore.

A high proportion said they want to see improvements in the enforcement of existing rules and regulations, as well as an updated framework to reflect emerging global practices. (Investors in Singapore focusing on corporate governance – survey,, 5/4/05)

Backlash Against Donohue

Stephen M. Davis and Jon Lukomnik have finally written what investors have been mumbling for months. Their article, “Tough Choice For Execs: Your Lobbyist Or Shareowners,” lays out the problem. How long will the owners of corporations allow the lobbyist of their managers to continue his relentless attack on them and their rights?

Institutional investors are angry with Thomas Donohue, president of the US Chamber of Commerce who helped kill the SEC’s “proxy access” rule, sued the SEC over its rule mandating independent mutual fund directors, and who has made strident personal attacks against Eliot Spitzer, Sean Harrigan, and others.

Here’s one paragraph from the article in which Nell Minow, the queen of corporate governance quotes, expresses her opinion of Donohue.

“I think the Chamber has shown contempt for shareholders, and I attribute that to Donohue personally,” Minow told the New York Times. “One of the most constructive steps shareholders can take right now is to target individual directors who do not deserve re-election, and Thomas Donohue is at the top of that list,” she told Compliance Week. Union Pacific’s annual meeting is May 5.

Will we see shareholder proposals next year asking companies to drop their membership with the US Chamber of Commerce? CEOs would do well to take the blunt advice of Davis and Lukomnik. “Leash your pit bull before he hurts your business.”

Also in the May 3rd edition of Compliance Week, an interview with Harvey J. Goldschmid who explains his simplified version of “proxy access” would move to 50.1% withheld votes—not counting broker votes—from 35%. (Harvey Goldschmid Looks Back, and Forward)

Alaska to Move from DB to DC?

A bill that would privatize retirement accounts for future employees was passed by the House Finance Committee. The proposed plan for the public employee and teacher retirement systems would switche workers hired after July 1 from a “defined benefit” to a “defined contribution” plan. Like the initiative circulated in California, the version passed by the Senate did not include a plan for employees who are severely disabled or killed while on duty.

The Alaskan fix appears to be that a new employee’s status would switch to a defined benefit plan if they were to die or be disabled because of an accident on the job. (Retirement plan goes to floor, Juneau Empire, 5/2/05)

Institutional Investors See Problems

A poll of institutional investors by Pearl Meyer & Partners found CEOs of major US companies are overpaid, golden parachutes serve no useful corporate purpose, and Directors should be held personally liable for financial scandals under their watch. 75% of institutional investors think that average CEO pay of $10.5 million at major companies is too high, while 59% oppose golden parachute arrangements and an overwhelming 98% say that Directors should be accountable for certain financial problems that occur under their watch.

Government attempts to stop financial misdeeds are also problematic, according to institutional investors. Only two of six Sarbanes-Oxley provisions, real-time disclosure of insider trading and the certification of financial reports by CEO/CFO, were rated as worth the cost (58% and 53%, respectively). (Institutional Investors Want More Corporate Governance Reforms: Survey, Plan Sponsor, 4/29/05)

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