Mr. Peabodys WayBackMachine

October 2014: 5, 10, 15 & 20 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

I reviewed The Modern Firm, Corporate Governance and Investment (New Perspectives on the Modern Corporation), edited by Per-Olof Bjuggren and Dennis C. Mueller. While I was reading chapter 2, its author, Oliver Williamson, was awarded the Nobel prize in economics… always nice when that happens. In the essay included in this volume, Williamson argues that contract/governance is an instructive way of opening the black box of the firm, especially with regard to antitrust matters. He examines the application of a contractual approach to various forms, such as lateral integration, pricing, scaling, horizontal mergers, and conglomerates.

The deadline for comments on the proxy access proposal was August 17th, so the comment letters have all been filed and posted. Many are well worth reading. I highlighted a few from TIAA-CREF, Cornish Hitchcock, J. Robert Brown, Lucian Bebchuk, the Shareholder Communications Coalition, Broadridge, John Wilcox, Eleanor Bloxham, and members of the Investor Suffrage Movement.

Ten Years Ago in Corporate Governance

The American Federation of State, County and Municipal Employees (AFSCME) Pension Fund and Connecticut Retirement Plans and Trust Funds have filed an annual meeting proposal aimed at giving shareholders a greater voice in electing directors at Halliburton, according to the WSJ. The proposal is aimed at beginning a process that could ultimately give shareholders the right to nominate up to two new board members on the company’s annual meeting ballot, according to the report.

CalPERS, CalSTRS, many pension fund members of the Investor Network on Climate Risk, and others are beginning to screen at least portions of their portfolios for environmental risks, such as global warming. According to WSJ, “this pressure raises the possibility that certain industry segments — coal-burning utilities, for instance — could be viewed as inherently risky because of their exposure to climate-change regulations.” (State Pension Funds Press Firms to Review Climate-Change Risks, 10/28/04)

For the first time in history, the U.S. Chamber of Commerce sued the SEC, alleging it lacks authority to require that 75% of mutual fund board members be independent, as well as having an independent chair.

According to a compensation survey conducted by Mellon Financial Corp., while more than one-third of companies review board members’ performance, only 6% tie pay to results.

A new survey by Deloitte shows that despite 70 per cent of FTSE 350 companies making changes to their board composition in the past 12 months, there has been no increase in the number of female board members.

Average pay for top American CEOs and board chairmen has soared from $479,000 to $8.1 million in the last quarter century, as measured in annual surveys by Business Week magazine, the only source that goes back that far. The pay of average (non-management) workers over that time, as measured by the U.S. Bureau of Labor Statistics, hasn’t even kept up with inflation. If average worker pay, which is now $26,899, had risen like CEO pay, it would exceed $184,000. If the minimum wage had risen at the same rate, it would now be almost $45 an hour.

Fifteen Years Ago in Corporate Governance

SEC proposed rules on audit committee disclosure, Release No. 34-41987, debated in 10/25 New York Law Journal. “The most controversial part of the proposal aims to encourage board members who sit on corporate audit committees to ask outside auditors or management tough questions about the company’s financial statements.” “While defense attorneys applaud efforts by the commission to improve the quality of corporate financial reporting, they worry about the liability audit committees will face if this disclosure rule is passed.”

IRRC reports union pension funds will shift their focus in the next proxy season in an attempt to focus on the long term. One proposal seeks to increase the voting rights of shares held for an extended period of time, another seeks to allow 2% shareholders (individuals or groups) to nominate a board member. See Corporate Governance Highlights, 10/22, for additional details concerning these proposals and several more.

Ralph Ward’s Boardroom Insider moves into its second year of publication. Ralph slices and dices boardroom advice quicker than a Ginzo knife on the Home Shopping Channel. He cuts to the bone and keeps up the pace.

Corporate Library, recently founded by Nell Minow and Robert AG Monks, is “intended to serve as a central repository for research, study and critical thinking about the nature of the modern global corporation, with a special emphasis on best practices and standards.” The Corporate Library appears to be another outstanding venture by leading practitioners in the field of corporate governance and will be headed by long-time LENS associate Ric Marshall.

I reported on my ongoing disputes with CalPERS regarding gift rules.

I reviewed Fair Shares: The Future of Shareholder Power and Responsibility. Charkham and Simpson are at the cutting edge of democratic corporate governance. Their vision fits nicely with the technology of the internet which will facilitate the spread of democracy into the world of finance. Widespread reading of Fair Shares and Ms. Simpson’s move to the World Bank are sure to add movement to their vision. Still a great read 15 years later.

I reviewed An Islamic Perspective on Governance, which I think needs more readers from the West than ever, given the current conflicts. I found interesting the observation that Christianity initially flourished among the politically disinherited. Jesus was a revolutionary but not primarily political, as in “give to Caesar what belongs to Caesar and to God what belongs to God.” In contrast, Islam was born outside the two empires of its time and created its own. Islam was the blueprint and basis for legitimization. Thus there is no separation of religion and politics in the Islamic perspective. Today I would add there is no separation between ethics and economics in the Islamic tradition. Perhaps we need to look to Islamic economics to see a discipline free from homoeconomicus.

Twenty Years Ago in Corporate Governance

I asked the Pension and Welfare Benefits Administration, which oversees ERISA, whether proxy voting is a duty as well as a right and if any agency had ever taken action against a plan fiduciary for voting proxies in a manner which was not in the best interests of plan participants. Yes, it is something of a duty. However, according to PWBA’s Proxy Project Report, only 28 of 91 investment managers had written procedures with regard to proxy voting. My investigation concluded that most funds did little or nothing to even go through the motions. At least they are much better on that score 20 years later.

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