Notable CorpGov Bites

Four articles worth reading are linked below., a website sponsored by the Manhattan Institute’s Center for Legal Policy, sheds light on the influence of outside shareholder proposals on publicly traded corporations. Their slant is fairly obvious in their latest Proxy Monitor Report, Fall 2012, but the data is worth reviewing.

A Report on Corporate Governance and Shareholder Activism

In recent years, activist shareholders have pushed publicly traded American corporations to reform their practices. In 2012, labor unions and associated organizers under the “Occupy” umbrella have been especially active in challenging executives’ pay. These activists, along with “socially responsible” investing funds allied with certain academics, nonprofit groups, and Democratic Party activists, have also challenged corporations’ political spending—an issue brought to the forefront of public discourse by a presidential election campaign.

Such efforts have largely dominated the corporate proxy season, in which shareholders vote on corporate business at companies’ annual meetings.

This report draws upon information in the Proxy Monitor database to assess the 2012 proxy season in historical context. Among its key findings:

  • A small group of shareholders continue to sponsor the overwhelming majority of shareholder proposals. In 2012, 36 percent of all such proposals were sponsored by labor-union pension funds; 31 percent were sponsored by three individual investors and their relatives and family trusts; and 22 percent were sponsored by investors with a “socially responsible” investing purpose or express religious or public policy purpose. Only 10 percent of shareholder proposals were sponsored by individuals other than the three “corporate gadflies,” and only 1 percent by institutional investors unaffiliated with organized labor or a social, religious, or public policy purpose.
  • Public-employee pension funds played a heightened role in the 2012 proxy season, sponsoring 38 percent of all labor-backed proposals, as compared with 26 percent in the entire 2006–12 period.
  • Religious-affiliated investors were far less active in the 2012 proxy season: proposals backed by religious investors constituted only 15 percent of all proposals backed by social, religious, or policy groups, as compared with 42 percent in the full 2006–12 period. Notably, Catholic orders of nuns sponsored only two proposals at Fortune 200 companies in 2012, as compared with 11 in 2011 and 16 to 19 annually between 2006 and 2012…. continue

Dual Class Share Structures: The Next Campaign

Posted by Francis H. Byrd, Laurel Hill Advisory Group, on Sunday September 16, 2012, HLS Program on Corporate Governance

The arguments over the merits of dual class share structures have been heating up of late. The issue has resurfaced as institutional investors have complained about the increasing number of IPO companies (Facebook, Groupon, Zynga being the most notable) who have gone public as dual class stock companies limiting the rights and influence of shareholders and turning them into economic bystanders.

One of the stories we cited comes from IR Magazine “CalPERS Strategy Could Avoid IPOs with Dual Class Share Structures” discussing how the fund giant is planning to advocate against the use of dual class structures for companies exiting private equity and entering the public market. Earlier in August, at the ABA Business Section CLE conference, in Chicago, there was a panel discussion on the topic (“Dual Class Stock: Value Enhancer or Corporate Governance Killer?”) The panel comprised of institutional investors, a corporate director (and former investment manager), as well as a corporate attorney and Delaware jurist, all squared off on the issue… continue.

Investing in Good Governance

BY LUCIAN A. BEBCHUK, NYTimes, 9/12/2012

Can investors generally beat the market by concentrating their portfolios on companies that practice good corporate governance? There is evidence that good-governance features included in standard governance indexes do improve the performance of companies – but that their significance is already reflected in market prices… This article is based on a study, Learning and the Disappearing Association between Governance and Returns, that Mr. Bebchuck co-authored with Alma Cohen and Charles Wang… continue to article.

Battle lines drawn in proxy access votes (Corporate Secretary)

Shareholders in the United States advocating so-called ‘proxy access’ are virtually certain to continue pressing for the controversial new rules next year, after winning a small but significant portion of votes at annual meetings this past spring. They also wrung significant governance concessions out of several other companies in exchange for withdrawing proposals prior to the meetings… continue to article

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