Mr. Peabodys WayBackMachine

August: 5, 10 & 15 Years Ago in Corporate Governance

Mr. Peabodys WayBackMachineCorporate Governance Publisher’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

CalPERS is believed by many, and for good reason, to be a paragon of virtue with regard to its advocacy of good corporate governance. Yet, their own election process had long been criticized as making it nearly impossible to unseat incumbents. At one point, the Board voted in favor of regulations prohibiting criticism of the Board in candidate statements, which were to be strictly limited to biographical information. To help remedy that problem I shelled out $500 to rent a hall, holding the first ever forum of CalPERS candidates. An expected winner who failed to show lost. Members finally had an opportunity to question candidates on their qualifications and their positions on the issues. These days, CalPERS is holding the forums in their auditorium. The next one is scheduled for September 16. See page 3 of Candidate Statement Booklet. For some of the latest issues, see CalPensions.

“When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well.” — New York Attorney General Andrew Cuomo explains the approach to ‘performance-related’ pay amongst banks. (PIRC Alerts, 8/4/09) 

In an effort to increase transparency to beneficiaries, invested companies and investor peers, the SBA posts proxy voting records on its website. This real-time vote disclosure occurs in advance of all annual shareowner meetings, normally within a few hours of the proxy vote being cast. Voting information is fully searchable based on date, calendar range, company name, and SBA portfolio. Voting data covers every publicly traded equity security for which the SBA retains voting authority (which excludes most foreign securities). The SBA’s current and historical proxy votes can be viewed here. Five years later and Florida SBA is still years ahead of most.

Years after one of my last contests to try to get on the CalPERS Board, the FPPC and the press are finally paying attention. In an exclusive to the Sacramento Bee, Andrew McIntosh notes Chuck Valdes’ bankruptcies and $38,600 in campaign donations from companies and individuals doing business with the pension fund after the 2005 contest. “Valdes, who was chairman of the multibillion-dollar pension fund’s investment committee at the time, has never had to account for how – or whether – the funds were spent because of an exemption in state regulations for retirement board members and candidates….” (FPPC probes campaign donations to CalPERS board member with money woes, 8/21/09)

Ten Years Ago in Corporate Governance

Nearly nine out of 10 (88%) companies said creating employee ownership through an ESOP (employee stockownership plan) was “a good decision that has helped the company.” Asked to quantify how the presence of an ESOP improved business performance, 65% of survey respondents indicated a better performance in 2003 relative to 2002, according to the Employee Ownership Foundation’s 13th Annual ESOP Economic Performance Survey. 

Beginning on August 31st mutual funds are required to disclose their votes. “To help prepare investors for the new disclosure of fund voting practices,” Pax World Funds, home to America’s first socially responsible mutual fund, issued the following list of five key shareholder resolution categories that investors should follow (on some, we’re still waiting):

  • Annual election of directors.
  • Separation of chairman of the board and CEO positions.
  • Risks associated with global warming.
  • Independent auditors.
  • Board diversity.

CalPERS, the biggest pension fund in the US, should take a page from its own guidelines and open a dialogue with its members on large issues. This will ensure the board doesn’t stray too far from the will of its members, will help the Board solidify its base, and will better guard against political backlash… Increasing its dialogue with members on these major issues and others may just add an ounce of prevention when CalPERS directors are accused of putting their own political or personal considerations ahead of their fiduciary mandate. Of course, directors risk not getting the answers they want but reformulating a few policies will hone their skills and will ensure more wide-spread support.

In a powerful essay (Politics and money: a volatile mix, Financial Times 8/9/04) Stephen Davis, of Davis Global Advisors, calls on shareowners to form “an investor-class version of MoveOn.org, the powerful, web-based mobiliser of grassroots political activism. Without it, director election reform is jammed at the SEC.”

Fifteen Years Ago in Corporate Governance

Two proxy guidelines that don’t make sense. This editor has repeatedly praised Domini Social Investments (Domini) and the California Public Employees Retirement System (CalPERS) for the leading roles each has played in the field of corporate governance. Both, for example, recently began to publish their proxy votes online and both have published their voting guidelines for some time. There are widely divergent opinions among shareholder activists concerning the value added by many policies so it doesn’t surprise me to find guidelines by Domini or CalPERS which I disagree with. However, two stand out: Domini’s policy to vote against cumulative voting and CalPERS’ policy to vote against proposals requiring director statements in support of candidacy.

Since Domini’s April challenge to the fund industry for transparency in proxy votes, there is little sign that other funds are rushing to the Internet with their own voting decisions. Michael Collins of CBS MarketWatch says Investors should know how their fund votes.

Christian Science Monitor reports that 42,000 top corporate managers own a fifth of corporate America. Perhaps the Berle and Means problem is over for the smaller firms where this shift in ownership has occurred (management continues to own a little over 5% at the largest 10% of firms). Berle and Means feared diffused stockownership would bring management’s control for management’s benefit. Now that it appears to have happened, researchers seem to be only celebrating the alignment of shareholder and management interests. (see The boss’s cut of the pie, 8/4/99)

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