Archive | October, 2011

Proxy Access for the 99% – Conference Call Halloween Night

While little goblins and rock stars roam the streets seeking handouts, USPX members will engage in a conference call on a model proxy access proposal. It has evolved substantially since the initial draft was announced in a way that I think will appeal to both large institutional investors, like public pension funds, as well as small retail shareowners.

There is still time for you to join the USPX and the Proxy Access members group where you will see the most recent draft and information on how to join the conference call, which starts at 8:45 pm EDT. Call limited to 97 participants.

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Two Opportunities to Shape the Future

First, the IRRC Deadline of November 18 for Research Entries approaches. This is your chance to change the predominant paradigm of Modern Portfolio Theory.

Second, Institutional Shareholder Services Inc. (ISS) extended the comment period on their 2012 proxy voting policies until November 7th.  Institutional investors, individual investors, corporate issuers, and governance market participants are invited to provide feedback on ISS’ policy updates.  ISS did a specific outreach to readers, so I Continue Reading →

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Proxy Access for the 99% – Open for USPX Member Comment

The time has come for shareowners to be allowed to include their own nominees for corporate boards in the proxy materials their corporations send out every year—so-called “ballot” or “proxy access.”

The current system—that only allows shareowners to vote for candidates nominated by the current board—is absurd. The SEC has finally reaffirmed shareowners’ right to submit proposals to corporations that, if adopted, would allow proxy access for those corporations’ shareowners.

A number of such proposals will be submitted for votes at 2012 annual Continue Reading →

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Proxy Access: Will the 99% Reach Consensus?

Tuesday’s post, Proxy Access for the 99%, is drawing controversy among USPX members, with about 30 comments in the first couple of days. Will we reach consensus or will shareowners simply end up taking elements of the model proposal for their own use?

So far, and we are only two days in, the $2,000 threshold to nominate is the most controversial aspect of the model language. Should that be raised to “a Continue Reading →

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The Governance Ombuds: SVNACD & Stanford's Rock Center

Why are corporate employees unwilling to report serious misconduct? Why are they also frequently unwilling to share good ideas for improving products, services and business processes? Fear of retaliation is most often cited for the failure to report misconduct; a sense of futility for the failure to suggest improvements. All too often, employees have a low level of trust in both management and the board.

The panel, which met in the morning at SVNACD and in the afternoon at Stanford’s Rock Continue Reading →

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Support Grows for Transparency in Corporate Political Spending

A group of 43 House Democrats is urged the SEC to require public companies to disclose their political contributions. The Council of Institutional Investors also sent a comment letter on a petition (File Number 4-637) filed by prominent law professors.

Rep. Gary Ackerman (D., N.Y.) and 42 other House colleague argue the high court’s ruling in the case, Citizens United v. Federal Election Commission, was “misguided” and left shareholders “completely in the dark, unaware that their money could be funding political attack ads.”

Shareholders cannot hold corporate management accountable for decisions the shareholders never knew were made. The present system is undemocratic and untenable.

Shortly after the decision, Rep. Gary Ackerman (D-NY) introduced the Corporate Politics Transparency Act, which would require corporations Continue Reading →

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Occupy the Boardroom

I attended a local “occupy” last night in Elk Grove, California. Eight protestors, six or seven police and four from the media. If it is happening in sleepy suburban enclaves it won’t be long before protesters show up at board meetings.

Occupy the Board Room will facilitate such action. “The 1% have addresses. The 99% have messages.”

Make your voice heard by the Wall Street elites who wrecked the economy and made the rest of us pay. Click on someone below and tell Continue Reading →

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Say on Pay May Lead to Closer Examination of Deductability

Don’t ignore the Wall Street protesters (Investment News, 10/17/2011)

Unlikely as it is that the Occupy Wall Street agenda (whatever that turns out to be) will be adopted wholesale by Congress, advisers can be sure that the group’s intensive illumination of stratospheric executive compensation and bank bailouts will translate into a public mood more conducive to higher taxes on the wealthy.

I’m betting that we will see many more suits like the following after the next say on pay round of votes, especially if Occupy Wall Street is still going strong. #OWS

From Jim Hamilton’s World of Securities Regulation, Shareholder Could Proceed with Derivative Claim that Proxy Statement Misled on Continue Reading →

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IRRC Deadline Upcoming for Research Entries

Friday, November 18, 2011 is the deadline to enter the IRRC Institute’s competition for research that examines the interaction of the real economy with investment theory.  Two papers – one academic and one practitioner – will receive the new “IRRC Institute Research Award” along with a $10,000 award.

Maybe it is just me, but I’ve got a feeling if you win this award you won’t have to go through the usual gauntlet to get your paper published in a respectable journal. (see cartoon at left by Nearing Zero)

The following panel of renowned judges with broad finance and investment experience will carefully review submissions and select two Continue Reading →

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SEC Abandons Celestial Reasoning, Divides Petition-Baby in Half

SEC Staff Legal Bulletin No. 14F (CF) finally addresses the issues of what is needed to evidence stock ownership for the purpose of filing a shareowner petition. It is obvious from first glance that shareowners whose broker or bank isn’t a DTC participant just got screwed.

We will take the view going forward that, for Rule 14a-8(b)(2)(i) purposes, only DTC participants should be viewed as “record” holders of securities that are deposited at DTC. As a result, we will no longer follow Hain Celestial.

On the other hand, we are still left with half the baby.

Companies have occasionally expressed the view that, because Continue Reading →

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Don't Be the Next JinkoSolar – Ceres Offers Aqua Gauge For Risk Management

JinkoSolar Holding Co., Ltd. got sued on 10/11/2011. The plaintiff firm is Sianni & Straite LLP. According to a press release dated October 11, 2011, the Plaintiffs allege violations of the federal securities laws in connection with false statements released surrounding its IPO.

Based in the People’s Republic of China, the Company launched an IPO in the United States on May 13, 2010 issuing 5,835,000 ADSs to trade  on Continue Reading →

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For Sale: Director Duties

What are the board of directors’ duties during the sale of a company? That is, when the seller is experiencing a change of control or a merger or acquisition?

As always, the board must observe its duty of care and the duty of loyalty. The duty of care requires the directors to gather the necessary information to decide the appropriate buyer. The duty of loyalty means that the board cannot act in their self-interest, such as preserving their jobs, rather than in the interest of the shareholders…

Douglas Y. Park runs through key Revlon duties in his post, The Board of Directors’ Duties During The Sale Of A Company at DYP Advisors.

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ISS Solicits Comments on 2012 Proxy Voting Policies

Institutional Shareholder Services Inc. (ISS) opened its comment period for their 2012 proxy voting policies.  Institutional investors, corporate issuers, and governance market participants are invited to provide feedback on ISS’ policy updates until October 31.  According to Martha Carter, ISS’ Head of Global Research,

ISS firmly believes that incorporating multiple views on corporate governance issues is critical for effective policy formulation. The uniquely transparent and collaborative nature of our policy formulation process serves not only to inform our policies, but also helps to create a higher level of understanding and dialogue across the corporate governance community.

I submitted comments to earlier draft policies and will participate in this round as well. I hope readers do the same. It is great that ISS uses such a transparent process, consistent with what they expect of corporations.

Over 300 respondents weighed in on issues ranging from executive compensation and director independence, to engagement triggers and social & environmental issues. The full results from the survey are posted to ISS’ Policy Gateway.

ISS will release its final 2012 U.S. and International Policy updates in the week of November 14 and its Global Policy Summary and Concise Guidelines in December.

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No Innocent Shareowners #OWS: The Duty of Care

John Paulson, the hedge fund titan who made billions in the financial crisis by betting against the subprime mortgage market defends the 1%: “The top 1 percent of New Yorkers pay over 40 percent of all income taxes, providing huge benefits to everyone in our city and state.”

“I don’t think we see ourselves as the target,” said Steve Bartlett, president of the Financial Services Roundtable, which represents the nation’s biggest banks and insurers in Washington. “I think they’re protesting about the economy. What’s lost is that the financial services sector has to be well capitalized and well financed for the economy to recover.” (In Private, Wall St. Bankers Dismiss Protesters as Unsophisticated, NYTimes, 10/14/2011)

What’s going on in America right now may be the world’s first genuine social-media uprising. Besides the standard channels of Facebook, whose Occupy Wall St page now has nearly 170,000 fans, Twitter, where the hashtags #occupywallst and #ows spew out dozens of tweets a Continue Reading →

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Webinar: Proxy Access Private Ordering under Rule 14a-8

Blank Rome LLP and Laurel Hill Advisory Group, LLC are hosting a complimentary webinar on Tuesday, October 18, 2011, at 12:00 pm EST to discuss how to prepare for the “private ordering” of proxy access under the amended provisions of Rule 14a-8. Full details can be found at the attached link.

Numerous issues and questions relating to the new Rule 14a-8 shareholder proposal rules that now permit shareholders to submit proxy access proposals and how they will affect the 2012 proxy season will be discussed.

By registering it will ensure that you get notified when we post the replay and the related presentation materials.

To register for this complimentary webinar, please click here.

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Occupy Suburbia: 99% @ Rte 99

I live in Elk Grove, California, a suburban enclave of Sacramento… if not middle America, at least middle California. Its a town where most kids are driven to school and soccer in minivans or SUVs. Most are too busy with their daily lives and trying to hold on to underwater mortgages to join ‘occupy’ movements in Sacramento or San Francisco. That doesn’t mean the movement has been completely ignored.

There was a post on the Elk Grove Patch and another on Elk Grove didn’t get much traction but the Patch attracted a Continue Reading →

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CalPERS Dumps Mtn Top Removal Project

After pouring $200 million into vineyards across California, Oregon and Washington, CalPERS said this week that it is firing the firm that has been its investment partner and land manager.

The investment has lost 40 percent of its value and was worth $122 million as of March 31, the latest figures available.

The California Public Employees’ Retirement System isn’t bailing out of the wine business. Instead, spokesman Brad Pacheco, said CalPERS is negotiating to bring on a new partner by year’s end…

The partnership paid $28 million for a 20,000-acre forest in the coastal mountains of northwest Sonoma County. The plan: Clear-cut an 1,800-acre tract, known as Preservation Ranch, and plant grapes on it.

The investors said profit from the vineyard would pay for restoration of the rest of the forest. They also pledged to donate 2,400 acres for a wildlife preserve.

I’m glad CalPERS finally got out of the deal. They should have done so years ago. Preservation Ranch is basically a mountain top removal project. I’ve seen enough of those in West Virginia near where I grew up to know the probable impacts. Instead of digging for coal, Preservation Ranch is leveling mountains to plant grapes. Real “restoration” would be extremely difficult. Read my email of May 25, 2009 on the project.

Read more: CalPERS fires partner in struggling winery investments, Sacbee, 10/14/2011.

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Pay Ratios and Ratcheting

Daniel F. Pedrotty, AFL-CIO, posted Why CEO-to-Worker Pay Ratios Matter to Investors to the Harvard Law School Forum on Corporate Governance and Financial Regulations on Thursday August 11. I’ve been meaning to mention it since then, mostly so that I have it file on my blog for future reference. I’ve got almost 16 years of corporate governance history on my blog (and more from my old site on my laptop, still waiting to migrate). This is one document I think people will be coming back to in the future.

Pedrotty’s post references Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires public companies to disclose the ratio of Continue Reading →

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Corporate Governance Matters but Not in the Way You Think

Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences by David Larcker and Brian Tayan. Larcker is the James Irvin Miller Professor of Accounting, Stanford Graduate School of Business. Brian Tayan is a member of the Corporate Governance Research Program at the Stanford Graduate School of Business.

The authors make a good case that corporate governance “suffers from considerable rhetoric.” Using available empirical evidence, they spend a considerable portion of the book debunking what are currently considered “best practices.” Fortunately, it doesn’t read like a diatribe, but rather a grounded framework that should be a valuable resource to anyone interested in this important subject.

After introductory chapters placing corporate governance in context, they devote substantial attention to the board: their duties and liabilities, selection, compensation, removal, structure. They also take a good hard look at CEOs: the labor market for CEOs, succession planning, compensation, and equity ownership. Other chapters cover organizational strategy, financial reporting and audits, market for control, investors, and ratings.

In 1994 the Council of Institutional Investors (CII) released Does Ownership Add Value?: A Collection of 100 Empirical Studies on the effectiveness of ownership structures and initiatives. Studies cited in Continue Reading →

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GMI & Si2 Offer Combined ESG Proxy Research

GMI and Si2 announced a strategic partnership to provide seamless
subscription access, account management and special pricing to the firms’ ESG Board Briefing Research, Shareholder Proposal Analysis, and Executive Pay Scorecards. The combination of GMI’s compensation analysis with Si2’s expert insights into key environmental and social issues and proposal analysis may create a vital new resource for Continue Reading →

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Vote to Top Business Law Blog

Help get named to the Top 25 Business Law Blogs. Go directly to 2011 LexisNexis Top 25 Business Law Blogs. 

There you’ll find a list of more than 75 blogs. Many are excellent. Scroll all the way to the very bottom of the page and you’ll find a comment box. Each mention of there is counted as a vote. Keep coming back and talking us up.

You have to be a member of the LexisNexis community and logged in to vote. However, you can quickly join for free by following this link. The comment voting period ends on October 25, 2011. LexisNexis will then post the Top 25 Business Law Blogs of 2011 and visitors will choose the Top Blog. Thanks for your support!

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Sacramento Kings: Dear & Ailman

Nice play on words by on the title of their article, Sacramento’s Kings, interviewing two of the most influential chief investment officers in America: Chris Ailman of the California State Teachers’ Retirement System (CalSTRS) and Joe Dear of the California Public Employees’ Retirement System (CalPERS). Of course, Sacramento is also home (perhaps temporarily) to the Sacramento Kings NBA team. In the scheme of things, Dear & Ailman seem a lot more important to me.

Interviews are wide ranging. CalSTRS is interested in getting into commodities. It sounds as if both funds are being held back from managing even more of their funds internally than they currently do by pay limitations on government employees… politically infeasible to pay what market would demand. Good discussion of risk analysis. Article is worth a quick read if you deal with either fund.

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Corporate Director Qualifications: Minimal

To be a company director, you need to be over 18, not insane (or at least found to be insane by a judge), and not bankrupt. That’s it. You can sit on a major board of directors, and not know anything about the company, its industry, or even know how to read a financial statement.

When you see an accountant, a doctor, an engineer or a lawyer, that person has a rigorous code of professional practice with which he or she must comply, ongoing professional Continue Reading →

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Publix, Google & UPS Top CSR List

Publix Super Markets, an employee-owned supermarket chain, earned the No. 1 spot followed by Google and UPS in the 2011 ranking of the 50 companies with the best corporate citizenship reputations among the U.S. public as compiled by the Center for Corporate Citizenship and Reputation Institute.

The CSR Index was developed to understand how companies’ reputations are affected by public perceptions of performance related to citizenship (the Continue Reading →

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