By August 31, 2018, California could become the first state in the nation with gender quotas to mandate publicly held companies that base their operations in the state to have women on their boards. The legislation—SB 826—will require public companies headquartered in California to have a minimum of one female on its board of directors by December 31, 2019. That minimum will be raised to at least two female board members for companies with five directors or at least three female board members for companies with six or more directors by December 31, 2021. Continue Reading →
Microcap Board Governance, a study conducted by Board Governance Research LLC commissioned by the Investor Responsibility Research Center Institute (IRRCi), examines microcap board governance at 160 companies. That represents about ten percent of all companies with less than $300 million in market capitalization traded on major U.S. stock exchanges. Continue Reading →
An updated 2018 AFL-CIO Key Votes Survey form is now available for completion by investment managers. Please note that the previously announced vote at Amazon will not be included in the 2018 AFL-CIO Key Votes Survey as the proposal was withdrawn before the annual meeting. The survey form can be downloaded as an Adobe Acrobat PDF file here: Continue Reading →
A stock buyback can increase senior executive pay, unrelated to performance. First, stock buybacks increase the value of long-term performance stock options and other forms of equity pay. Second, senior executives sometimes time their own stock sales to take advantage of the bump in price that usually accompanies stock buyback announcements. Such behavior defeats the purpose of incentivizing a long-term focus. To address our concern that performance pay should not be artificially boosted by a stock buyback, I recently submitted a proposal to Cisco Systems and expect to submit similar proposals to other companies.
Last year, I submitted a similar proposal to GE. The updated submission to Cisco Systems adds a provision to address market timing. As always, I welcome suggestions and comments from interested readers. How can such resolutions be improved? What have I missed? Or, if you disagree, why are my concerns unwarranted? Use the comment section below the post or email me. Continue Reading →
NorthStar Asset Management, Inc., a Boston-based wealth management firm, announced that it has published a white paper outlining its perspective on the issue of domestic (U.S) prison labor in company supply chains, and recommending best practices for companies and investors to uncover and respond to abusive labor practices.
Prison Labor in the United States: An Investor Perspective goes into detail about how prison labor has become a critical issue related to economic inequality, racial justice, and human rights. Explained CEO Julie Goodridge, Continue Reading →
A new measuring effectiveness roadmap helps investors ensure they are moving beyond generating environmental or social impact through individual market transactions and are better aligning with broader system-level goals (e.g., the United Nations Sustainable Development Goals, SDGs). Group action along the same trajectory can better influence system-level change. The measuring effectiveness roadmap helps investors answer the following question: How can I measure whether I, as a long-term institutional investor, have contributed to promoting the long-term wealth-creating potential of the environment, society, or the financial system? Continue Reading →
CEO Incentives can boost short-term stock price but destroy long-term value, according to the two winning academic papers of the Investor Responsibility Research Center Institute (IRRCi) annual investor research competition. The winning academic research teams share a $10,000 award. Continue Reading →
As millennial-aged employees now represent the majority of the U.S. workforce, it is increasingly important that corporate management finds ways to engage them in the company. Creating 401k plans which connect to their core values — like solving human, social and environmental problems through their work and investments — can be a huge advantage to the company as a whopping 85% of millennials surveyed in the 2016 US Trust study said they consider their investment decisions as “a way to express their social, political, and environmental values.” This attracts the best talent, spurs employee engagement, extends retention, and sparks innovation. Continue Reading →
The India Proxy Season 2017 came to an end on September 30th. InGovern collated meeting details of 1,502 companies. I do very little to cover the India proxy season, so welcome this informative report from InGovern, India’s first independent corporate governance research and advisory firm.
The Trump Jump
The Center for Political Accountability reported today on a Trump Jump. Mutual funds support for the CPA’s corporate political disclosure resolution jumped significantly in the first year of the Trump presidency. In 2017, support increased to 48% from 43% in 2016, according to an analysis by Fund Votes. The analysis also found that abstentions decreased from 5% to 3%. My own habits also took a Trump jump, since this is the first year I beguan submitting such proposals. My first target is Kimberly-Clark, (KMB) with several more to come.
According to CPA president Bruce Freed, Continue Reading →
Standing Voting Instructions: Empowering the Excluded Retail Investor by Jill E Fisch just could be the most important article on corporate governance this year… if it is widely read and acted on. Download at ecgi, Penn Law or SSRN. The above photo is from Small Investors Support the Boards. But Few of Them Vote, The New York Times. Unfortunately, most will not bother to read the article. What follows is both and summary of main points and my commentary. Hopefully, this post will lead to reading the research and adding your voice to those petitioning the SEC to facilitate standing voting instructions. Continue Reading →
Pearl Meyer on CEO Pay Ratios: Pay Transparency is the New Black
Pearl Meyer on CEO pay ratios. The leading advisor to boards and senior management released its 2018 Looking Ahead to Executive Pay Practices survey but long before that, in May 2015, one of their principals declared Pay Transparency is the New Black. I guess that means pay transparency will be the next thing in corporate governance fashion. Or maybe like the TV series Orange is the New Black, we will have a lot of laughs along as CEO pay ratios are disclosed but we have a sinking sense this will not end well. Continue Reading →
Moskowitz Prize Winner Announced
Moskowitz prize winner for 2017 was announced today by the Center for Responsible Business at the Haas School of Business, University of California, Berkeley, in collaboration with The SRI Conference (#AllinForImpact). The prize is named after research pioneer Milt Moskowitz, one of the first researchers to look for the connection between good corporate citizenship and profitability. Sustainable and responsible investing remains the focus.
Continue Reading →
The 50/50 Climate Project released their Key Climate Vote Survey 2017 (link) of votes by America’s largest investors. Those attending last week’s informative Fall Conference of the Council of Institutional Investors in San Diego found out about it and many other newsworthy items.
Key Climate Vote Survey 2017: Groundbreaking Season?
First-time approval of climate risk proposals at Exxon (XOM) and Occidental (OXY) represents a huge win. Victory was only possible because of a highly visible shift in voting by mainstream funds State Street, J.P. Morgan, as well as from BlackRock and Vanguard, which joined climate risk proponents for the first time.
However, do not get complacent. More effort to get mutual funds to address climate change is still needed. According to the 50/50 Climate Project representatives at CII, Vanguard backed only 15% of such proposals, while Blackrock voted for only 9% — despite both managers’ high-profile support of resolutions at ExxonMobil and Occidental. The cynic in me says votes may be more driven by the potential for adverse publicity, rather than potential impact on value, although the two are undoubtedly correlated. Compare to Vanguard’s Investment Stewardship 2017 Annual Report.
Through a proxy proposal, we asked the Twitter board to study broad-based ownership, such as cooperatives, for lessons to be learned on how to make Twitter both more productive and more democratic.
The proposal won enough votes to be brought back next year. In the meantime, we continue building a campaign and studying broad-based ownership models ourselves. With that backdrop, I was delighted to see commentary in Fortune by Joseph Blasi and Douglas Kruse entitled, Why Don’t Twitter’s Employees and Customers Buy the Company? “Consider why it might actually work,” they argued. Continue Reading →
Innovations in Cooperative Ownership: Converted and Hybrid Listed Cooperatives (Link), by O.F. van Bekkum and J. Bijman, is one of the more interesting research papers I have read since our proposal for Twitter (TWTR) to study cooperatives won 5% of the vote, making it eligible for resubmission for the 2018 annual meeting. Before we redo the proposal (and perhaps expand its use to other companies), I want to examine the available research. If you lean of other studies, please let me know. For background on the 2017 proposal at Twitter and alternatives, see the following: Continue Reading →
CalPERS and CalSTRS sponsored a diversity forum in Sacramento on Wednesday, May 12, 2017. The goal of the Diversity Forum was to bring together investment and corporate executives to discuss how to better capitalize on the abilities of the diverse modern workforce. While I think diversity should be adopted simply because it is morally right, often economics speaks volumes in the finance community. The McKinsey Global Institute estimates that narrowing the global gender gap could add US $12 trillion in annual gross domestic product to global growth.
The Forum focused on:
- Recent research
- Developing and implementing positive, solutions-oriented initiatives and real world best practices
- Insight and experience of industry leaders
A Public Citizen report shows mutual funds hold back political spending transparency through their proxy voting behavior. Fully 64% of political spending disclosure shareholder proposals would have passed with majority support if major mutual funds owning more than 5% had voted in favor of them in 2016.
The report, released during a telephone press conference last week, calls on the nation’s largest mutual fund companies to support political spending disclosure. Press conference participants included US Sen Robert Menendez (D-N.J.); John Coates, professor of law and economics at Harvard Law School; and Patrick Doherty, director of corporate governance for the Office of the New York State Comptroller.
For years shareholders have been pushing companies to disclose information critical to shareholders’ ability to evaluate their investments. Major mutual fund companies can and should play a pivotal role, according to Public Citizen and its partners in the Corporate Reform Coalition. Continue Reading →
The Global Sustainable Investment Alliance (GSIA) released its biennial Global Sustainable Investment Review 2016, showing that global sustainable investment assets reached $22.89 trillion at the start of 2016, a 25% increase from 2014.
Sustainable investment encompasses the following activities and strategies:
- Negative/exclusionary screening,
- Positive/best-in-class screening,
- Norms-based screening,
- Integration of ESG factors,
- Sustainability themed investing,
- Impact/community investing, and
- Corporate engagement and shareholder action.
Yet, many in the mainstream press continue to disparage sustainable investing. This morning, Justin Baer of the Wall Street Journal reported that “interest in so-called environmental, social and governance investing is surging.” (State Street Offers New Tool to Gauge Environmental, Other Social Risks) There is nothing “so-called” about the movement to ESG investing. It is real.
Proxy Statements Disclosing Engagement
Nearly half of S&P 100 companies included information in their proxy statements that showed how they responded to shareholder concerns and made changes to policies, according to a new report from Equilar, Innovations in Proxy Design, featuring commentary from Donnelley Financial Solutions and Pay Governance.
In 2012, just 14.3% of the S&P 100 included disclosures in their proxy statements on how they modified their practices after engaging shareholders, a figure that increased to 42.0% in 2016.
The new Equilar GDI (Gender Diversity Index) found it will take nearly 40 years for Russell 3000 boards of directors to reach gender parity. If the current rate of growth remains the same, Russell 3000 boards would reach 50% male and 50% female representation in Q4 2055.
I urge readers 5/10 join CalPERS & CalSTRS at this year’s Diversity Forum, an all-day event in Sacramento. We do not have to wait for 2055 to obtain gender parity. Join us to learn strategies that should move us forward at a substantially quicker pace. More information:
Equilar GDI: Research
The Equilar GDI is an index that measures 50% representation of both males and females on Russell 3000 boards as “1.” As of December 31, 2016, Russell 3000 boards were at 0.30 on the index, nearly one-third of the way toward parity. The data reflects that 15.1% of board seats at Russell 3000 companies were occupied by women as of year end. This represented an increase from 13.9% at the same point in 2015, which was up from 13.2% in 2014. Continue Reading →
Gadfly proposal on your corporate proxy? One implicit conclusion from a recent academic study is that you should short the company as soon as the SEC disapproves the company’s no-action request, since a proposal from a gadfly is likely to reduce the company’s value. Even though their intent is primarily to show why managers generally oppose proposals, that is the takeaway investment strategy one might conclude from a paper by John G. Matsusaka, Oguzhan Ozbas and Irene Yi entitled Why Do Managers Fight Shareholder Proposals? Evidence from No-Action Letter Decisions. (Why Do Managers Fight Shareholder Proposals, pdf)
Investors Skeptical of Gadfly Proposals
Researchers found a statistical correlation between Securities and Exchange Committee (SEC) staff decisions to block a no-action request and negative abnormal returns over the period of 2007-2016, “suggesting that investors agree with managers that these proposals are value-destroying.” “[O]ur main finding is that the market responded positively to the granting of a no-action letter.” “Investors are not particularly skeptical of proposals by unions and public pensions, but appear to view proposals by individual ‘gadfly’ shareholders as value-destroying.” Continue Reading →
Illumina and Brocade Communications are both in my portfolio, so when I saw them pop up at the Securities Class Action Clearinghouse I decided to share the information with my readers. It has been a while since I mentioned the Clearinghouse, a great resource to learn about recent class action filings.
US SIF Foundation Releases 2016 Biennial Report on UA Sustainable, Responsible and Impact Investing Trends. Sustainable, responsible and impact investing (SRI) assets now account for $8.72 trillion, or one in five dollars invested under professional management in the United States according to the US SIF Foundation’s biennial Report on Responsible and Impact Investing Trends 2016, which was released today. Continue Reading →
A new report and scorecard grades 20 of the largest food retailers in the U.S on their policies and practices regarding pollinator protection, organic offerings and pesticide reduction. Of the top food retailers, 17 received an “F” for failing to have a publicly available policy to reduce or eliminate pesticide use to protect pollinators. Only Aldi, Costco (COST) and Whole Foods (WFM) received passing grades in this category. Continue Reading →
Rising Stars of Corporate Governance Award – Each year, the Millstein Center for Global Markets and Corporate Ownership at Columbia Law School presents the annual Rising Stars of Corporate Governance Awards.
This award recognizes people who, while young and possibly new to the field of corporate governance, are making their marks as outstanding analysts, experts, activists, or managers. Recipients may represent any of the many bodies that comprise the world of corporate governance: corporations, academic bodies, institutional investors, auditors, advisory firms, rating agencies, proxy services, professional associations, and others. Continue Reading →
Stock Buybacks: Directors Identify Four Reasons Stock Buyback Programs
Stock Buybacks: What Directors Say
Gadflies at the Gate: Why Do Individual Investors Sponsor Shareholder Resolutions? is the catchy title of a new paper (8/2006) by David F. Larcker and Brian Tayan. Its part of the Stanford Closer Look Series from the Corporate Governance Research Initiative. While I am happy to see a more objective view the role retail shareholder advocates play in corporate governance than the nonsense presented by Steven Davidoff Solomon, I’m not sure what Gadflies at the Gate really adds by raising questions without advancing answers. I suppose, like many academic papers, it is pointing out the need for further research, like a cobbler calling for more shoes. I advise further reading that is more action oriented.