In comments to the SEC on proxy plumbing issues, the US Chamber of Commerce expresses concern that:
Directors, who are implicitly or explicitly beholden to an individual, or to a special interest group, may have a conflict of interest with the fiduciary standards that directors must adhere to. A potential example of this is the CalPERS 3D Program… It is unclear what if any safeguards are in place under the 3D Program to insure that members of the pool of shadow directors adhere to their fiduciary responsibilities, if elected to the Board, and not act in the interest of a particular individual or a specific group. Accordingly, the CCMC believes that the 3D Program should be required to become transparent in its operations and publicly disclose among other things:
- The extent and purpose of the 3D Program and what shareholder interests it is advancing;
- The process that the program grants membership in its director pool, including the involvement of third parties in that process, the questions candidates are asked, and the responses candidates provided, as well as any assurances the candidate provided, or which were made to the candidate,
- The names and affiliations of recruited shadow directors and their qualifications;
- Any political contributions made by a shadow director to any CalPERS board member;
- Any award and amount of any contracts or investment business by CalPERS to a shadow director;
- Any award and amount of any contracts or investment business by a CalPERS board member to a shadow director; and
- Any personal relationship between any CalPERS board member and any shadow director.
Any other organization that would seek to use the 3D pool of shadow directors should have to issue similar disclosures as listed above. Additionally, we believe that appropriate supervision should be given by the SEC to insure transparency and disclosure whenever such a list of potential nominees is drawn up by a group or groups that may be engaged in an effort to use the newly promulgated proxy access rules or combine short slates.
CalPERS and CalSTRS have a third party handling the database, and an advisory panel of experts, including companies, to steer the project. It’s therefore an arms length facility. Of course, any director nominated to a company board would serve under the same duties as any other director.
When similar suggestions were brought up in comments on proxy access rulemaking, it was pointed out that several go well beyond what is required for candidates involved in actual proxy contests that could result in a change of control. Why should proxy access candidates and their sponsors, who can’t take control, face more stringent requirements?
It might be interesting to see similar disclosures (and more) with respect to candidates vetted by current corporate boards and CEOs, as well as oversight by the SEC of that process. And how about transparency of the operations of the Chamber of Commerce? Talk about “shadow” governance…
I’m all for transparency, as long as long as the rules are principles based and apply to all sides. I would love to see forums where institutional and retail shareowners can ask questions of all board candidates before voting their proxies, like the recent forum CalPERS candidates participated in. (see Video Friday, 9/7/2010)