Corporate Governance: Stepping Back in Time From September 2013

MrPeabodysWayBackMachinePublisher’s Note: Yes, you’ll find many broken links in the material referenced below. 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. More about the WABAC machine.

Five Years Ago in Corporate Governance

  • According to Jackie Cook,  “Opposition to CSR resolutions by mainstream fund groups (votes cast ‘against’ CSR shareholder resolutions) has fallen by a full 13 percent over the five year period, from 85 percent in 2004 to 72 percent in 2008. This corresponds with a large and sustained increase in abstentions by mainstream funds on CSR resolutions over the five year period from 10 percent in 2004 to 16 percent in 2008.” We concluded funds were deciding to cop-out on some of the tougher proxy issues.
  • Both versions of the bailout bill have “say-on-pay” provisions.
  • Andy Eggers blogs about the addition of the AFSCME pension plan and the Florida State Board of Administration to the Proxy Democracy database.

Ten Years Ago in Corporate Governance

  • The Economist Intelligence Unit (EIU) reports that 74% of 310 senior asset managers polled around the world said shareholders were becoming more active in influencing how companies they own are operated. Once rubberstamp boards have become more assertive.
  • CalPERS, CalSTRS, AFSCME, the New York State Comptroller and the Connecticut State Treasurer’s Office took a full page ad in the Wall Street Journal, urging the SEC to give American investors greater access to corporate election ballots, calling it “the next critical step of corporate reform.”

“When boards control their own membership, directors can be unaccountable and inattentive — opening the door to abusive executive compensation, fraud and other misconduct,” the ad says. “If properly drafted, the SEC’s new rules will give shareholders the ability to use proxy materials to elect truly responsive directors, leveling the playing field with board-nominated candidates.”

The ad points to a Harris Poll of 1,030 adult investors funded by AFSCME showing that 84% want access to the company proxy to nominate and elect directors.

  • John S. Reed, former chairman and co-chief executive officer of Citigroup, will take over leadership at the NYSE and will they try to sort out how the exchange will be governed. He’ll be paid $1. “At the New York Stock Exchange, we are talking about a board with a combined chairman and C.E.O., with a conflicted board that was mainly handpicked by the chairman and we are talking about excessive secrecy,” said Stephen Davis, president of Davis Global Advisors. “For all the hue and cry about poor governance at the exchange, these kinds of sleepy boards are commonplace all across the nation.”
  • “Director education programs are booming, but I predict that this is just the beginning of a movement toward professionalizing the job of director,” says board guru Ralph Ward and author of Saving the Corporate Board. “Within a few years, investors, courts and regulators will be looking closely at how many hours of training your board members have accumulated. Getting serious on sending your board back to school now will keep you ahead of the curve.”
  • In “Access denied!” Hoffer Kaback (Directors & Boards) argues that once having elected a board, how can shareholders then seek to challenge a board’s “considered decision” of nominating a slate through a company proxy that is, itself, in large part the formal product and document of those same board members in their capacity as representatives of those shareholders. Kaback sees this as an “analytical pretzel,” where “self-referential, circular, and renvoi problems “ are “troubling.”I don’t think you’ll find many Americans who agree that voters shouldn’t be able to challenge the considered decisions of their elected officials. Grousing about politicians, threatening impeachment and even recall are time honored traditions. Why should it be any different for boards of directors?

    The more fundamental flaw in Kaback’s argument is that board members were never elected by shareholders in the first place, so they aren’t really challenging their elected representatives. Instead, they are challenging board members who are likely to have been either chosen or blessed by the CEO, a former CEO, or an “independent” committee whose members may or may not be the CEO or former CEO’s college roommates, dentists or other close friends. In any case, shareholders will have had as little input into determining the actual directors as voter in North Korea have over selecting their “elected” officials.

  • Eliot Spitzer, the New York attorney general, found major mutual fund companies engaging in fraudulent after-market trading practices with privileged institutional investors. Canary Capital Partners, has agreed to settle with Mr. Spitzer’s office, returning $30 million in profits and paying a $10 million penalty.

Fifteen Years Ago in Corporate Governance

  • LENS disclosed it has become the owner of more than 5% of Juno Lighting and will press for improved performance. LENS principal Nell Minow says Juno recently had over $90 million in low-yielding cash and marketable securities which could be put to better use. The firm also needs better succession planning and greater independence on its board, according to Minow.
  • Toronto Stock Exchange (TSE) to set disclosure guidelines to corporate web sites, according to report in Investor Relations Business, 11/14/98. TSE suggests companies consider posting transcripts of all analyst conference calls, that material news releases be issued to newswires before posting, and that an e-mail link allow investors to communicate directly with IR reprensentatives. For more information, see the IRB article and TSE’s press release or call 416-947-4760 to obtain a copy



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