Five years ago in Corporate Governance
Publisher’s Note: Yes, you’ll find many broken links. After 5, 10 and 15 years, the internet moves on. Many of the organization’s linked have since gone under. We’re just glad to still be here, offering our readers a sense of the history we have shared.
Since 2005, KLD has studied the S&P 100’s sustainability reporting practices for the Sustainable Investment Research Analyst Network, a working group of the Social Investment Forum. The 2008 Sustainability Report Comparison reveals encouraging news. Of the 100 largest U.S. publicly-traded companies, 86 maintain corporate sustainability websites and 49 produced sustainability reports in 2007.
ResponsibleShopper.org (updated) ranks companies by industry from best to worst based on global research and campaign information regarding the impact of the largest corporations on human rights, social justice, environmental sustainability and more.
Support for an advisory “say on pay” continues to grow, if more slowly than expected, rising from 41% last year to 42% in 2008. Directorship, reporting the results of a Corporate Library study, notes that “say-on-pay proposals received majority support at a total of 15 companies in 2007 and 2008. But not all of those companies are rushing to put the advisory vote in place. In fact, only five of those companies, or roughly two-thirds, have adopted the vote.”
Vote results are lower this year at financial institutions, where CEOs have been replaced with lower compensation packages. (Companies Ignore ‘Say on Pay’ Votes, 7/23/08)
New election rules take effect on July 26, 2008, thanks to action taken by Corpgov.net publisher, James McRitchie. At McRitchie’s request, the Office of Administrative Law determined several CalPERS election rules were illegally adopted “underground regulations.” (see 2007 OAL Determination No. 1) The amended regulations clarify many election procedures and significantly reduce the risk of CalPERS members to identity theft.
Eighty-six percent of companies on the Standard and Poor’s 100 Index have corporate sustainability websites, compared to 58 percent in 2005, according to the “2008 S&P 100 Sustainability Report Comparison” from the Sustainable Investment Research Analyst Network (SIRAN), a working group of the Social Investment Forum. (More S&P 100 Companies Reporting CSR Progress: Study, GreenBiz.com, 7/22/08)
The Delaware Supreme Court ruled that CA shouldn’t be forced to pay for dissident shareholders’ proxy fights and the SEC issued a no action letter. (decision)
Under a procedure established under Delaware law last year, the SEC asked the state’s Supreme Court to decide whether a bylaw proposal by AFSCME to CA, formerly Computer Associates, was “a proper subject” for shareholder action under state law. The bylaw would have required CA to reimburse a shareowner for proxy costs, including legal expenses, printings and mailings, if the shareowner unseats at least one CA director in a slate of candidates representing less than half the board.
The Court held that the bylaw was a proper subject for stockholder action. However, the Court also held that if adopted the bylaw would violate state law because “the bylaw contains no language or provision that would reserve to CA’s directors their full power to exercise their fiduciary duty to decide whether or not it would be appropriate, in a specific case, to award reimbursement at all.” (Del. Supreme Court rules for CA on shareholder issue, delawareonline, 7/18/08.
Retail vote goes down dramatically using e-proxy (based on 468 meeting results); number of retail accounts voting drops from 21.2% to 5.7% (over a 70% drop) and number of retail shares voting drops from 31.3% to 16.4% (a 48% drop). (Broadridge’s “Near-Final” E-Proxy Stats for the Proxy Season, TheCorporateCounsel.net Blog, 7/14/2008)
The Investor Responsibility Research Center Institute for Corporate Responsibility (IRRCi) hired Jon Lukomnik as program director. Lukomnik will spearhead the Institute’s efforts to become the preeminent source of objective and relevant research examining the intersection of investments with environmental, social and governance issues.
July 2008 Institute of Internal Auditors International Conference
The July 6-9, 2008 gathering of internal auditors attracted 3,000 from around the globe. I sat with auditors from every continent except Antarctica working for businesses, governments and nonprofits.
General session speakers were shown on four screens at San Francisco’s Moscone Center West to ensure everyone had a front row seat. Featured speakers included Jim Collins, Sharon Allen, Linda Bardo Nicholls, Gene L. Dodaro, former Senator Paul Sarbanes and Kevin “the Katalyst” Carroll. Interesting that the “motivational” speaker came last.
Ten years ago in Corporate Governance
A simulation by Innovest for a major US pension fund found that a slight “tilt” toward certain SRI criteria resulted in gains averaging 1% for five of six portfolios, with the one fund only underperforming by 0.04%.
The Innovest results directly contradicted the findings of a recently publicized study from the Wharton School at the University of Pennsylvania. That study concluded that including socially responsible investment factors could cost active investors as much 3.6% per annum in lost performance.
Forbes praises CorpGov.Net for its “unbridled linkfest and no annoying product promotions.” We won “Best of Web, while The Corporate Library won 1st place as category favorite. We can’t think of a better site to trail. In fact, we’re please dto ever be mentioned in the same breath with The Coporate Library. We’ll never have their resources but continue to belive there is room for many in this field. See reviews.
GovernanceMetrics International (GMI), an independent governance ratings agency, rated 1600 global companies from 15 countries. Seventeen companies – fifteen US and two Canadian, received scores of 10.0, GMI’s highest rating.
California’s Assembly Appropriations Committee should pass AB 1428 (Levine), which deletes the current limit on reimbursements paid to employers of CalPERS’ elected Board members for an employee to replace the board member while that member attends to board duties. However, before voting the bill out of Appropriations, CalPERS should submit a plan to recover excess reimbursements paid to CalPERS Board members since September 2000.
The “SEC Staff Report: Review of the Proxy Process Regarding the Nomination and Election of Directors” provided background, summarized public recommendations (see also Appendix A to the Review – Summary of Comments), outlined alternatives and made recommendations to the Securities and Exchange Commission for a rulemaking.
Five alternatives for increasing shareholder involvement in the nomination and election of corporate directors were presented by staff and can be summarized as the following:
- Require companies to include shareholder nominees in company proxy materials.
- Require companies to deliver nominating shareholders’ proxy cards with company proxy materials.
- Require greater disclosure by nominating committees.
- Require further disclosures regarding shareholder communications with the Board.
- Revise Exchange Act Rule 14a-8 to allow shareholder proposals related to the company’s nomination process.
Writing for Dow Jones, Neal Lipschutz raises the issue of where candidates stand on shareholders’ right to nominate corporate directors. (see Point of View: Proxy Access And The Presidential Race, 7/8/03) “Hard to believe, for sure. But there are early indications that corporate governance may become an issue in next year’s U.S. presidential election and the Democratic primaries that precede it.” “We’ve come a long way baby,” is my response.
The June edition of Governance includes an editorial by Michelle Edkins, Director of Institutional Relations, Hermes Focus Asset Management, calling in the SEC to allow separate voting for each director (with for, against and withhold options for each), disclosures should provide information about their “suitability” for the job and the “nomination process should be as professional and robust as that for recruiting a senior executive and should be led by independent directors.” Additionally, “shareholders representing a sizeable ownership stake should be able, easily and cost effectively, to put binding resolutions on the agenda for a general meeting.”
Dow Jones reporters summarize efforts on open access issue in “From Leaflets To Web Sites, Investors Rally On Proxy Issue.” They give well deserved credit to Les Greenberg for posting a couple of hundred messages on chat boards, encouraging readers to send comments to the SEC.
However, they also point out that the Council of Institutional Investors “handed out fliers on the streets of Washington near Metro stations telling passersby about the SEC’s comment period. Shareholder activist Web site eRaider spread the word on its message boards. The California State Teachers’ Retirement System became involved for the first time in corporate-governance outreach, devoting a section of its Web site for nine days to instructing visitors on how to send an e-mail to the SEC, along with suggested language for the missive; the link received 368 hits.” It would be nice to know which of these efforts paid off.
The SEC approved listing requirements requiring listed companies in the United States to gain shareholder approval for new stock option plans, or significant changes to existing plans.
The new rules also prevents NYSE-member brokerage firms from voting on behalf of shareholders in equity-compensation matters unless the shareholders have given voting instructions. Does this signal the beginning of the end of broker voting for most issues? We hope so.
Fifteen years ago in Corporate Governance
P&I notes the growing influence of the internet in linking shareholders, citing CII, LENS, AFL-CIO’s Executive Paywatch, CalPERS, Motly Fool and our own “huge website on corporate governance.” Yes, and we’re just getting started.
James Kristie won the Philadelphia Prize, awarded by the Financial Analysts of Philadelphia, for his article “Timeline: The Evolution of 20th Century Corporate Boards” which appeared in the Fall 1997 edition of Directors & Boards. If we gave a prize for the best article of 1997, we’d give it to Kristie as well.
As little as 1/3-1/2 of most companies’ stock-market value is accounted for by hard assets such as property, plant and equipment. This has led to a search for elaborate computer models to measure the links between employee satisfaction, customer satisfaction and revenue. Sears, for example found that if employee attitudes improve by 5%, customer satisfaction will jump 1.3%, resulting in a 1/2% rise in revenue. (WSJ, 7/22, B1)
William Crist, president of the CalPERS board, asked Charles Valdes, chairman of the investment committee, to rule State Controller Kathleen Connell’s representative out of order for questioning money management executives about political contributions. Pensions&Investments, 7/13 The majority of the board appears to continue to support a recently enacted policy which cuts off political contributions to the controller and treasurer but leaves intact such contributions to the governor and legislative leaders who appoint four board members.
Sanford University Law School has announced that it is planning to establish a Fiduciary College for trustees and senior management officials of public and corporate pension funds, Taft-Hartley pension funds and endowment funds. Curriculum of the initial Fiduciary College would focus on the fundamentals of modern finance and portfolio theory and their implications, fiduciary duties and responsibilities, governance issues for the funds, risk-adjusted performance assessment, roles in corporate governance, trading issues, and international investing. Teaching faculty would include appropriate practitioners, as well as faculty from the Law School, including Professor Joe Grundfest. Fiduciary College will be directed by Richard Koppes. For more information, see NAPPA.
The Financial Women’s Association of New York (212) 553-2141, with 1,100 members, has launched a campaign to encourage more women on corporate boards. IRRC (5/1)
A 10 year limit on board tenure, as initially proposed by CalPERS staff for their corporate governance principles, would apply to 45.8% of directors at companies analysed by IRRC, according their 4/2 report. As I recall, only about 38% of the CalPERS board itself would fall into that category.
Contrasting shareholder meetings. Dell Computer will use ADP’s internet voting facility and will conduct an audio broadcast through their internet site, while the Green Bay Football Corporation will hold its shareholders meeting at Lambeau Field, expecting 20,000. (ISS, 7/2)
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