Wayback Machine: September 2006

Below is a sampling of stories covered by CorpGov.net 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 Employees (AFSCME) against the American International Group Inc. (AIG) insurance company.
  • Ed Durkin, the director of corporate affairs at the United Brotherhood of Carpenters and who oversees $40 billion pension funds, is a real hero to many of us seeking more democratic corporate governance. When proxy access stalled, Durkin had the vision to push majority vote. The result is that more than 200 US companies have adopted some form of majority voting within the last year and a half, some directly due to shareholder initiatives and some “on their own accord” because of shareholder pressure.
  • Just as I predicted, perfect alignment of a victory with AFSCME v. AIG and troubles at HP, brought four public pension funds together who own about $700 million invested in the firm. They filed a proposal with Hewlett-Packard to let shareholders nominate their own slate of directors at the next annual meeting.
  • ADP Group President S. Michael Martone has developed a habit for using the corporate jet, judging by the proxy the company filed earlier today, which notes that Martone spent $257K on his personal use of the corporate jet in 2006, or nearly half of his salary of $542K. That’s not the only perk that Martone received last year: there was also $44K for a country club membership and a $30K tax gross up to cover the cost of that membership and another $24K plus a $19K gross-up to cover moving expenses. Indeed, all of the perks taken together add up to $384K, or nearly as much as Martone’s $412K bonus. (An expensive habit to hick?, Footnoted.org, 9/27/06)
  • CalPERS, the largest U.S. public pension fund, is thinking about investing for the first time in Chinese firms, said chief investment officer Russell Read in an interview with the Financial Times… In a speech to the Forum on Corporate Governance in Asia, for the Asian Development Bank on May 11 2002, I said the following: “As governments and market forces institute reforms, CalPERS and other funds will get more sophisticated in their approach. Country ratings should be used in tandem with corporate ratings. Combining the country’s score with a given company’s score would more accurately measure risk. CalPERS would still invest substantially more in countries with transparency, political stability and good labor practices. However, exceptional corporations in difficult environments would not be completely out of bounds. CalPERS practices engagement in the US market; many of us believe it should do the same in emerging markets.”
  • The NYSE is postponing amendment of broker-voting in order “to allow companies additional time to prepare for implementation,” according to attorney Larry Sonsini, who chaired the Proxy Working Group for the New York Stock Exchange…
  • Corporate governance is below par in most emerging countries a new survey examined 321 companies from 25 countries in emerging markets has found. GovernanceMetrics International, the corporate governance research and ratings firm, found the average rating for companies in emerging markets was 4.3, compared to an average rating ranged from 6 to 7. Only two emerging market companies -Taiwan Semiconductor Manufacturing Co. and Gold Fields Ltd. of South Africa – rated above average at 7.5.
  • Nice article by Bill Baue posted to SocialFunds.com, September 14, 2006, Court Affirms Shareowner Right to File Resolutions on Proxy Access for Nominating Directors… My response: If the SEC let’s the decision of the court stand, shareholders will be able to address the specific needs of each company. One size doesn’t fit all but in all cases shareholders should have the right to recommend through resolutions, or require through bylaws, access to the proxy for their nominees. That’s exactly what the court decided, turning the clock back to the way the SEC read their own rule prior to 1990. Let it stand.
  • On September 18, 2006, CorpGov.Net publisher James McRitchie petitioned the CalPERS Board to adopt regulations similar to those proposed by CalSTRS limiting gifts and campaign contributions. Additionally, the petition requests CalPERS to set forth in regulations requirements that members of the board of administration comply with the same governance standards CalPERS attempts to impose on corporate boards. Compare with previously rejected petition, filed on 8/5/98.  I also posted on Clamping down on “pay-to-play” practices the same month. As I post this Wayback article, we are waiting to see if Governor Brown will sign measures to address both issues. (see Controller asks Jerry Brown to sign ‘good government’ bills
  • Best Practice in Internal Oversight of Lobbying Practice by Robert Repetto makes a case for rapid adoption of best practices in corporate governance of corporate lobbying activities. According to the author, “best practice requires oversight and approval of significant lobbying activities, expenditures and positions by a standing board committee of independent directors. Leading companies on this issue have recognized that lobbying on public policies requires board oversight because it involves significant shareholder interests and can be intrinsic to the outcome of business strategy. Nonetheless, only a small fraction of U.S. corporations now have such a system of board oversight in place, despite the potential sensitivity of lobbying activities.”
  • The US Senate Finance Committee meeting will hear witnesses beginning at 10:00 am on 9/6/06 on Executive Compensation: Backdating to the Future/Oversight of current issues regarding executive compensation including backdating of stock options; and tax treatment of executive compensation, retirement and benefits. Witnesses will include Nell Minow, Lucian A. Bebchuk, Charles M. Elson, and others.

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