Quick Reads in Corporate Governance

Time to Move Down the Food Chain With Proxy Proposals

How does director voting look so far this year? Eighty percent of directors up for election received over 90% shareholder support. And nine of ten received at least 80% support. Directors of large-cap companies had the highest rate of support, averaging 95% approval. Small cap and Micro-cap directors had the lowest affirmative rates, with 76% voting “for.” Only a very small number of individual directors (less than 2%) failed to receive majority shareholder support.  (From ProxyPulse, a Broadridge PwC Initiative. Much more at the site.)

Social Stock Exchange

The UK Government has announced the launch of the Social Stock Exchange (SSE)- a new initiative designed to connect the public financial markets with social impact investment. According to UK Prime Minister David Cameron,

The SSE gives investors access to information on publicly listed businesses with strong social and environmental purpose, and guarantees full and transparent disclosure on the impact of those businesses. The global market for social impact investment is estimated to be worth $9 billion and expected to grow to between $200 and $650 billion in the next decade.

See more at UK Launches Social Stock Exchange, which also mentions a similar effort in Australia. Where is the United States?

More Male Directors = Less Female Directors

Dah; GMI Ratings shows that women’s lack of progress in gaining more seats on corporate boards over the last 12 years may be linked to the high percentage of men serving at least 10 years as directors.

More than 25 percent of board seats in the US are held by men with at least 10 years’ tenure, according to the report, which analyzes the potential impact of replacing various percentages of these long-tenured men with women. If less than half (46 percent) of the male directors in the Standard & Poor‘s 500 Index with over 10 years’ seniority were replaced by female directors, women would hold 30 percent of that index’s board seats. In the Russell 1000 and 3000 indices, 54 percent and 62 percent, respectively, of the men with over 10 years’ tenure would need to be replaced by women for women directors to reach the 30 percent threshold.

Currently women make up 17.5 percent of the directorships of the S&P 500, 15.1 percent of the board seats of the Russell 1000 and 12.1 percent of those of the Russell 3000. More at Study links long-term male directors with lack of gender diversity on US boards, Corporate Secretary, 7 June 2013.

Key Metrics Series: Internal Pay Equity

Academic research supports the idea that large inequities in NEO pay may negatively affect corporate performance. A 2010 study by Harvard professors Lucian Bebchuk, Martijn Cremers and Urs Peyer found that the percentage of aggregate NEO pay that went to the CEO — also called the “CEO pay slice” — was negatively correlated with firm value. This result held true even after accounting for many other variables, including industry, CEO tenure, CEO status as owner or founder, and overall compensation levels at the company compared to peers. The study also demonstrated that a larger CEO pay slice correlates with lower profitability; that the stock market responds less positively to acquisitions made by firms with a large CEO pay slice; and that CEO turnover at such firms is less sensitive to performance. More from GMIRatings.



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