Archive | September, 2011

Occupy Wall Street

The NY Transit Workers Union (TWU) Local 100 voted to join the protestors in the financial District of New York City, and so have the Verizon union members. Other unions, including the Teamsters (yes, those Teamsters who once supported Ronald Reagan) have issued public statements of support for Occupy Wall Street (OWS) protests… includes video of Tony Bologna pepper spraying. (“Occupy Wall Street” Is Getting Huge — But Where Are the Democratic Politicians?, AlterNet)

The young heroes on Wall Street today baffle the world because they have issued no demands. The villains of Wall Street had their demands — insisting upon a massive bailout for themselves in 2008, while they pocketed million dollar bonuses. The Wall Street protesters are not seeking a bailout for themselves; they are working to bail out democracy. (Van Jones, Wall Street Protests: Which Side Are You On?, Huffington Post, 9/30/2011)

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Anonymous Analytics Examines Corporate Governance

Anonymous is “a decentralized network of individuals focused on promoting access to information, free speech, and transparency. The group has made international headlines by exposing The Church of Scientology, supporting anti-corruption movements in Zimbabwe and India, and providing secure platforms for Iranian citizens to criticize their government.”

Anonymous Analytics, a faction of Anonymous has moved the issue of transparency from the political level to the corporate level. To this end, we use our unique skill sets to expose companies that practice poor corporate governance and are involved in large-scale fraudulent activities.

Anonymous researchers–who include unnamed and unnumbered “analysts, forensic accountants, statisticians, computer experts, and lawyers”–will base their investigative reports on information “acquired through legal channels, fact-checked, and vetted thoroughly Continue Reading →

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Video Friday: Exec Pay, Balancing Expectations or Class Warfare?

Scott Cutler, EVP, NYSE Euronext, interviewed Linda Lamel, Compensation Chair, Universal American Financial Corp. for This Week in the Boardroom (video) 9/29/2011.

See also the AFL-CIO’s PayWatch and the Young Turks video. In 2010 the average worker saw a 2.6% increase in salary but a 3.6% increase in the Consumer Price Index. Meanwhile median CEO pay increased 27%.

The emergence of an oligarchy in this country will undermine our place in the world and ultimately our historic form of capitalism, which, in the past, was the route to the middle class for hundreds of millions of hardworking Americans.

The latest evidence of this struggle is the report from the Institute for Policy Studies which found that of America’s 100 highest-payed CEOs, 25 took home more in pay than their companies paid in federal taxes.CEO Pay: Class Warfare, Behind the (New York) Times, 9/2/2011.

Here’s the ISS 2011 US Compensation Policy. Want to see CEO pay stop soaring? Use the Shareowner Guidelines For Say-On-Pay Voting, issued by the United States Proxy Exchange.

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Shareowner Alienation

I stumbled upon an interesting article in the Vol. 52, No. S3, Supplement to the April 2011 edition of Current Anthropology, which gets to the heart of the schizophrenic way we have organized capitalism. While many of us work to make the world a better place, our investments externalize costs and jeopardize everything we hold dear.

David Wood

Marina Welker, an Assistant Professor at Cornell, and David Wood, Director of the Initiative for Responsible Investment at Harvard, do an outstanding job of examining socially responsible investment, shareholder value, and responsible investment and how those movements address the relationship between shareholder personhood, values, and investments. The article, entitled Shareholder Activism and Alienation also includes a thoughtful comment by Robert A. G. Monks. Socially responsible investors Continue Reading →

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Shareowners Too Busy But Hamermesh Offers Wrong Solutions

Lawrence A. Hamermesh, Widener University School of Law, Wilmington, Delaware gave the Keynote Speech to the Practical Law Institute’s Ninth Annual Directors’ Institute on Corporate Governance on September 7, 2011. In Too Busy to Think, Spread Too Thin to Matter: Making a Rational Stockholder Voting System an Agenda Item for Management/Investor Dialogue, he runs over some interesting territory and concludes we need to limit the number of shareowner meetings and votes to make them more meaningful.

Prof. Lawrence A. Hamermesh

One option is to “require a stockholder vote on the election of directors once every three years, unless owners of more than, say, 3% of the voting power demand a meeting in the meantime.” Another would be to “dispense with annual meetings” but substitute “some enhanced stockholder right to ballot access and to convene stockholder meetings.”

I agree there are problems but these “solutions,” especially the first, could lead to even less accountability than we have now. Hamermesh reminds his audience of Chancellor William T. Allen’s 1988 opinion in Continue Reading →

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Inspiration: Many CEOs Don't Recognize It

CEOs are six times more likely than employees to believe they work in a company where people are inspired. Instead, employees see themselves as coerced (84%) or motivated (12%) by “carrots and sticks,” rather than a commitment to mission and purpose (4%). Are CEOs just deceiving themselves… or employees deceiving their CEOs?

How important is a values base for a company? For all of us, it can collectively mean the difference between salubrious and a toxic environment. For the company and its shareowners it can mean Continue Reading →

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Equilar Change-in-Control Study: Cash Multiples Decrease

Equilar examined change-in-control arrangements among Fortune 100 companies for fiscal years 2008 and 2010. Key Findings:

Change-in-Control Cash Multiples Decrease for CEOs:
The prevalence of 3x salary multipliers among Fortune 100 CEOs decreased from 65.9% in 2008 to 44.2% in 2010, while the prevalence of 2x salary multipliers rose from 18.2% to 34.9%. Similarly, the prevalence Continue Reading →

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3D System Live: Will Directors Be More Accountable?

Beginning today, applicants with the skills and experience to be a candidate for a corporate director’s seat can submit their profiles through the Diverse Director DataSource – “3D” program. Once a pool of talent is established, shareowners, companies, diversity groups and other organizations will be able to use the program to recruit board candidates.

The DataSource was conceived by the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). GovernanceMetrics International (GMI), an independent provider of global corporate Continue Reading →

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Retirement Security for All

Hank Kim, Executive Director and Counsel for the National Conference on Public Employee Retirement Systems (NCPERS), has unveiled a proposal for a new type of retirement plan. To those who think CalPERS and other pensions for public employees should be abandoned, the proposal offers an alternative. See Retirement Security for All.

The proposed Secure Choice Pension (SCP) is aimed at enhancing retirement security in the private sector by providing workers who are not in a pension plan with a Continue Reading →

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Wayback Machine: September 2006

Below is a sampling of stories covered by 5 years ago this month. After reading this list, it looks like shareowner victories five years later may have slowed slightly or is that just my imagination. One amazing parallel, the decision in AFSCME v AIG then and lifting the stay on Rule 14a-8 amendments allowing renewed proxy access five years later.

  • In what could be the most significant victory in the corporate governance movement in recent years, the U.S. 2nd Circuit Court of Appeals ruled that shareholders should be able to consider proposals to allow them to put their nominees on the corporate proxy. The case was brought by the American Federation of State, County and Municipal Continue Reading →
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McKenna's Insights into Berkshire Hathaway

Francine McKenna isn’t afraid to take on the big four auditing firms or the rich and powerful. Look for her column, Accounting Watchdog at The following is an extended excerpt from a recent post, The Berkshire Hathaway Corporate Governance Performance. “Buffett judges the investments he makes ruthlessly, but allows his operating companies to run on autopilot.” That decentralized structure allows plausible deniability when anything goes wrong.

I encourage reading the entire article and getting familiar with McKenna’s work. It is good to see such an expert willing to speak truth to power. As a Berkshire Hathaway shareowner, her analysis certainly makes me nervous and it is hard to imagine shareowners taking on such an iconic figure through governance initiatives successfully.

…Before leading the Treadway Commission, before the savings and loan scandals of the 1980’s, before Enron and the rest of the scandals of the 90’s such as WorldCom, Tyco, Adelphia, HealthSouth, and many Continue Reading →

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NACD Names McRitchie as One to "Watch"

(Elk Grove, CA, September 20, 2011) — is pleased to announce that Publisher, James McRitchie has been named for the second year in a row to the National Association of Corporate Directors’ (NACD’s) 2011 Directorship 100 list of “People to Watch,” in recognition of his work promoting the highest standards of corporate governance.

James McRitchie will be among those recognized at a gala dinner on November 8 at Continue Reading →

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Retirement Security for All

Hank Kim, Executive Director and Counsel for the National Conference on Public Employee Retirement Systems (NCPERS), has unveiled a proposal for a new type of retirement plan. To those who think CalPERS and pensions for public employees should be abandoned, the proposal offers an alternative. See Retirement Security for All.

The proposed Secure Choice Pension (SCP) is aimed at enhancing retirement security in the private sector by providing workers who are not in a pension plan with a guaranteed, lifetime retirement income that would be immune to stock market fluctuations and economic downturns. The plan would provide the flexibility and portability that a mobile private work force needs, while spreading investment risks and costs over large pools of plan participants and employers, according to a press release.

“Less than half of private sector employees have access to an employer-sponsored retirement plan — and many of those who do simply are not financially prepared for retirement,” said Hank Kim, Esq., Executive Director and Counsel for the National Conference on Public Employee Retirement Systems (NCPERS). “Recent studies have put the gap between what private sector workers are saving and what Continue Reading →

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L'Apel: Democratic Capitalism at Risk

Recently, ICGN held their annual conference in Paris. From the Twitter feed, it appears I missed a good one. (see ICGN Via Twitter) I’ve already mentioned Jon Lukomnik’s appeal to look again at the idea that shareowners’ interests and executives’ can be aligned through compensation strategies.

I think one origin of our errors was revising the tax code so that executive compensation above $1 million is only a tax deductible expense if performance based. The result has been, as Lukominik observes, that compensation plans have taken on the characteristics of “a slot machine: They pull a lever and three years later out comes a trickle of coins or a fountain of folding money.” This is a topic worthy of much discussion.

Another truthsayer at the conference was Robert A.G. Monks, whose L’Appel can be read as quickly as fast food but provides nutritional value of a much higher order. Bob lays out a number of observations. I’ll just list a few: Continue Reading →

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When the CEO Really Must Go

It is often said that “the most important function of a board is to hire and fire the CEO.” Yet the experience of many is that boards do a pretty good job on the hiring front and a not-so-good job on the “exit.” An exciting SVNACD session in Palo Alto focused on the pitfalls of CEO changes and how to avoid them. The panel couldn’t have been more timely. (Bartz fired at Yahoo…may have violated disparagement clause: Kathleen Peratis, Outten & Golden)

This program, like all SVNACD programs, was subject to the Chatham House Rule: “Participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.” In this case, the panelists had already been identified publicly.

As with many SVNACD events, the audience was frequently as informative as panelists. My report will give you just a flavor of what went on. To get the whole meal, you’ll have to Continue Reading →

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Blanks Votes: Australia & US

It is great to see Manifest, the proxy voting agency, raising the issue of management voting proxy items left blank by shareowners.

In the majority of markets with developed shareholder voting procedures, for each proposal, the shareholder has three choices; to vote for, against or abstain. Alternatively, shareholders can actively elect for the chairman to direct their votes at his/her discretion (a directed proxy). In cases where the shareholder has not made a choice in any regard (an undirected proxy), it is common for Continue Reading →

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Proxy Access Lite?

The revisions to SEC Rule 14a-8 are expected to come into effect this week. Many investor advocates were disappointed when the SEC decided against appealing a court decision that struck down the more potent Rule 14a-11, which would have forced proxy access on all companies.

So starts Erik Sherman’s Proxy access lite to go live in Inside Investor Relations, 9/14/2011. I’m quoted extensively speculating about Continue Reading →

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Wayback Machine: Ten Years Ago at

Ten years ago this month I posted a review of Monks, Robert A. G., The New Global Investors: How Shareowners Can Unlock Sustainable Prosperity Worldwide, Capstone Publishing, 2001. “His perspective is that of an aristocratic shareholder activist, not a street demonstrator against the World Trade Organization… Monks appears to believe, and I agree, that corporate control has been largely hijacked by CEOs for their own selfish interests.”

This seemed to be something of a turning point book for Monks. In previous books, he rejected the need for new laws. “No new laws need be passed, no new regulations promulgated, no new agencies formed,” as he says again in this volume on page 184. However, by the next page he concludes that “amendments or possibly new regulations may prove necessary.” Good, but then he went on to write that the Continue Reading →

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Shareholder Democracy Summit Coming to Toronto: Blank Vote Issue

The Canadian Society of Corporate Secretaries announces the Shareholder Democracy Summit ─ a Canadian first. CSCS has invited key stakeholders to gather this coming fall on October 24 and 25 in Toronto for an important national summit on shareholder democracy.

CSCS President Lynn Beauregard announced today that invitations to register for the Shareholder Democracy Summit will be issued in the coming weeks to all key participants. The CSCS President remarked that when Canadian shareholders vote, whether they are individual shareholders or one of our largest institutional shareholders, their voice is often not heard or it is misheard. People think it’s like voting in an electoral campaign – once a shareholder fills out Continue Reading →

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Corporate Spring

Ordinary people using Facebook and Twitter overturned dictators in Tunisia, Egypt and Libya. David Kirkpatrick of Techonomy Media, which promotes the integration of technology with business and social progress, writes “this social might is now moving toward your company… you’d better get out of their way—or learn to embrace them.”

Gary Hamel, one of business’ most eminent theoreticians of management says,

I don’t think it’s crazy to ask if your CEO is the next Mubarak. The elites—or managers in companies—no longer control the conversation. This is how insurrections start.

Says Marc Benioff, CEO of “This isn’t just about Arab spring. This is about corporate spring.”

Twitter is a potent broadcast tool for anyone with a following. By “checking in” via a smartphone app or SMS through FourSquare, users share their location with friends. Foursquare allows users to bookmark information about venues and make Continue Reading →

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Proxy Access Arrives (Almost)

Sure enough, not long after I blogged yesterday about how the US Court of Appeals for the District of Columbia Circuit had not yet finalized its decision, I got word that the court had indeed done so in this brief ruling on Wednesday. But trust me, no one knew about it – so I have my excuse. So yesterday, the SEC posted this adopting release lifting the stay – and thus the Rule 14-a(8) stay will be lifted once the new rules are published in the Federal Register. That might be today or next week sometime…

Broc Romanek’s theCorporateCounsel.netProxy Season: SEC’s Rule 14-a(8) Stay Lifted (Almost), 9/16/2011. I’m working on a draft template for proxy access proposals. If you’d like to be a part of that effort, let me know.

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Audio Friday: BBC Discussion on Corporate Governance

Peter Day asks what’s wrong with corporate governance. Business leaders make a lot of fuss about corporate governance, but the scandals keep on coming. In this programme, Peter Day hears from some leading authorities who makes several observations concerning nonexecutive directors, ownerless corporations, and the need for shareowners to sit on the nominations committees, a stewardship proposal for shareowners, and ratcheting CEO pay even when a company isn’t paying the cost of its capital. The program, entitled Bad Company, hit a number of topics quite squarely.  Well worth a listen.

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Review: Boardroom Q&A

Since 1997, Boardroom INSIDER has focused not on the big topics of governance — the kind I try to address at — but the little topics of boardsmanship, the real-world concerns that directors urgently ask about. In his new Kindle published book, Boardroom Q&A: Ralph Ward Answers Your Toughest Boardroom Questions… even those many boardmembers are unwilling to ask. Well qualified himself, much of Ward’s advice comes from a wide variety of top experts.

At a cost of less than $8, it has to be the most cost-effective tool available to boardmembers. Every company should buy a copy for all their board members. I’ll give you a small sampling of snippets Continue Reading →

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Institutional Investors Urge SEC to Issue New Proxy Access Regulations

Leaders from some of the world’s largest pension funds and institutional investors representing more than $2 trillion today issued the following statement urging the U.S. Securities and Exchange Commission (SEC) to issue new regulations on proxy access, which gives long-term shareowners the right to include their candidate for the Board of Directors on a company ballot.

The SEC’s rule granting shareowners full proxy access was the right rule when it was issued – and it’s the right rule today. The merits of proxy access by shareowners have been Continue Reading →

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ICGN Awards Neuville, Bebchuk and Davis

Madame Colette Neuville received the prestigious ICGN Life-time Achievement Award in Corporate Governance at its Annual Conference. Madame Neuville, known as a stark defender of minority shareholder rights in France for the last 20 years, is recognised for her defence in cases such Vivendi vs Havas in 1998, Schneider vs Legrand in 2001 and Renault vs Nissan in 2002.  An economist and lawyer, Madame Neuville has organised her efforts through Association de Defense de Actionnaires Minoritaires (ADAM). She has been a member of the European Corporate Governance Continue Reading →

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Proxy Access Under Private Ordering: Advice of Counsel is a new database of law firm alerts, as well as providing many other resources. A great site worth exploring, which I have added to our blogroll. I encourage readers to go to the original documents linked below, since there you will get the clips in full context. My intent here is to simply provide a sampling of current advice to corporate management.

Alston + Bird: With respect to the Rule 14a-8 amendments, given the stated reasons for implementing the stay (including statements about how “intertwined” Continue Reading →

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SEC Organizational Reforms

The Dodd–Frank Act directed the U.S. Securities and Exchange Commission (SEC) to engage an independent consultant to conduct a broad and independent assessment of the SEC’s internal operations, structure, funding, and the agency’s relationship with Self-Regulating Organizations (SROs). Issued in March 2011, the consultant’s study provided 16 optimization initiative recommendations designed to increase the SEC’s efficiency and effectiveness. In the six months since the study was issued, the SEC has developed the necessary program management and oversight infrastructure to address the next step in the agency’s on-going multi-year change initiative: conducting a thorough analysis of each recommendation and designing appropriate approaches for those recommendations selected for implementation. Over the next six months, significant work will have been done within each workstream to analyze the Boston Consulting Group’s (BCG) recommendations and recommend what, if any, actions should be taken. See Report on the Implementation of SEC Organizational Reform Recommendations.

One section I’m particularly concerned with is the Dodd-Frank requirement to create four new offices that report directly to the Continue Reading →

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Deadline for Golden Peacock Awards: September 14

If you know of good candidates for the Golden Peacock Awards, instituted by Institute of Directors in 1992, now is the time to get nominations in, since they are due September 14, 2011. Below are the categories:

A.      Golden Peacock Global Awards

  1. Sustainability
  2. Excellence in Corporate Governance

B.       Golden Peacock National Awards

  1. Climate Security
  2. Sustainability
  3. Excellence in Corporate Governance
  4. Innovation Management

The application form cum guidelines can be obtained by sending an Continue Reading →

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