Tag Archives | Broc Romanek

CEO Pay Machine Destroying America

The CEO Pay Machine (cover)The CEO Pay Machine: How it Trashes America and How to Stop it (Amazon) by Steven Clifford should be mandatory reading for all compensation committees and those who vote proxies for large funds. The book is easily read and understood by the layperson. It also includes the fact-based evidence needed to convince fiduciaries that voting against most executive pay packages is one of the first steps to restoring shareholder value, company sustainability and the very foundations of American democracy.

Why combine CEO and chair positions or pay executives with options when both practices lead to poor results? We don’t except “everyone else does it” as an excuse for harmful behavior from our teenagers; why should we accept it as a reason from compensation consultants and the former CEOs sitting on most corporate boards? Clifford also outlines possible remedies but nothing will be done unless we shift public opinion. If widely read and discussed, The CEO Pay Machine could be central to change. Continue Reading →

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Governance Lessons from Wells Fargo

Governance Lessons From Wells Fargo

Governance Lessons From Wells Fargo

Tone at the Bottom: Governance Lessons from Wells Fargo

That was the advertised title for the program co-sponsored by the Rock Center for Corporate Governance and the Silicon Valley Directors Exchange. (Sign up to be on the SVDX mailing list.) After the program, I am still not convinced the real governance lesson from Wells Fargo (ticker: WFC) is not more about lack of oversight from the top, rather than the tone at the bottom.

It was another great panel of corporate governance, legal, and public relations experts for the deep dive into what went wrong. As usual, it was Chatham House Rule, so I’m mostly providing a little more background and some commentary on the presentations. I am sure others drew different conclusions than I did. The panel focused on issues ranging from public disclosure requirements, whistleblower policies and mechanics, compensation policies (including the board’s use of claw-back provisions), company policies regulating employee conduct, and the negative publicity suffered by the bank. Here were some of the advertised questions:

WFC panel

WFC panel

What happens when you have a well-meaning and talented board and a CEO who was regarded within the industry as one of the best managers with a stellar reputation? Was it inevitable that the CEO would be forced to step down by an outraged Congress and populist sentiment? What governance lessons from Wells Fargo are applicable to the non-banking industry, with special attention to Silicon Valley-based tech companies?

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Proxy Access at FirstMerit, No Exception



Morrow&CoFirstMerit (FMER) included a management proposal for proxy access in their annual meeting agenda and excluded a shareholder proposal on the same topic from the Firefighter’s Pension System of the City of Kansas City with a higher cap on nominees. See Proposal #4 Proxy Access. What was even more startling in the ‘news’ from an April 3rd Morrow & Co. advisory was that “ISS did not make reference to the shareholder proposal that was omitted from the proxy,” recommended in favor of the proposal and was not recommending a withhold on any directors. Continue Reading →

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Proxy Access: Keith Higgins Speaks on SEC’s (i)(9) Review

Broc Romanek

Broc Romanek, Editor of TheCorporateCounsel.net & CompensationStandards.com

Yesterday (2/10/2015), Corp Fin Director Keith Higgins delivered this interesting speech entitled “Rule 14a-8: Conflicting Proposals, Conflicting Views.” There are some really interesting things in this speech on counterproposals, etc., although there isn’t much that helps those companies grappling with proxy access shareholder proposals this proxy season (but there is some, such as #6 below). Here’s some notables from Keith’s speech: Continue Reading →

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Video Friday: Quadruple Feature Thanks to CorporateAffairs.tv

BrocRomanekBroc Romanek‘s CorporateAffairs.tv has started with a bang and plenty of early content in the form of brief videos that even those of us with attention deficit disorder can watch without missing a beat. Some in the ‘entertainment’ category are not so much for me. Still, it is great to see Broc and friends having fun. We’re too often in jobs or situations where there is far too little of that.

In the education category, a couple of my favorites include Birth of the Securities Act of 1933 and Shareholder Proposals: Who Submits Them? Continue Reading →

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Video Friday: CorporateAffairs.tv

TheCorporateCounselOnce again, demonstrating that learning can be fun, Broc Romanek recently announced the launch of his newest site – CorporateAffairs.tv! Well before Dave Lynn & Broc dabbled in silly videos years ago, he’s wanted to build a site focusing solely on video. CorporateAffairs.tv provides free videos – all of them short in length – that fall within one of three categories: educational, news or entertainment. And he built the site himself! Continue Reading →

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Dialogue – QVB vs Proxy Exchange: Buy Votes or Assign Them?


I recently wrote on what I thought were conflicting ideas. As I’ve indicated in the past, I disabled comments because of too much spam, even with filters. However, I encourage readers to comment via e-mail. Sometimes we get a good exchange. Here’s a recent example, starting with the first two paragraphs from the post, then moving to comments:BrocRomanek

Thanks to Broc Romanek I learned of what he termed the Wildest Idea of the Year? Creating a “Vote Buying” Framework, July 29, 2013. Here’s part of his take:

Two Professors from the U. of Chicago – Eric Posner and Glen Weyl – have used their economic backgrounds as a way to devise a solution to shareholders who are too lazy to vote or too ill-informed when they vote as Continue Reading →

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QVB vs Proxy Exchange: Buy Votes or Assign Them?

VoteBuyingThanks to Broc Romanek I learned of what he termed the Wildest Idea of the Year? Creating a “Vote Buying” Framework, July 29, 2013. Here’s part of his take:

Two Professors from the U. of Chicago – Eric Posner and Glen Weyl – have used their economic backgrounds as a way to devise a solution to shareholders who are too lazy to vote or too ill-informed when they vote as noted in their study. So the essence of their idea is to force shareholders to buy votes so that only “interested” parties have a right to vote – owning shares would only provide a shareholder with a right to profits… Continue Reading →

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CII Sticks Up For Retail Investors on Blank Votes, Phony VIF Ballot Titles & Biased Vote Reporting

Has the Council of Institutional Investors (CII) turned over a new leaf or am I only beginning to notice because they recently came out publicly agreeing with me?  Three years ago a group of us petitioned the SEC to clarify that the same rules that apply to proxies also apply to voter information forms, VIFs. The group included Glyn Holton, Mark Latham, Eric M. Jackson, James P. Hawley, Andrew Williams, Andrew Eggers, Bradley Coleman and Erez Maharshak.

Recently, CII wrote to the SEC in support of that position, without explicitly citing our earlier petition. In their April 5 letter, concerned with a proposed rule’s incentives to create “enhance brokers’ internet platforms (EBIPs), CII reminded the SEC that key to the stated intent of the rule was to provide benefits to investors and corporate governance generally. Before moving forward on EBIPs, CII recommends action or clarification on the following: Continue Reading →

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Happy 11th Anniversary to TheCorporateCounsel.net/Blog

 Broc Romanek has been blogging for 11 years as of today. As he said yesterday, “it takes stamina and boldness to blog for so long.”

His is the one news source I check every day. TheCorporateCounsel.net is central to those in the corporate governance industrial complex.

Congratulations Broc. Your posts are succinct and informative with just the right amount of quirkiness for readers to appreciate the real person behind the curtain. Broc is a passionate provider of practical guidance on legal issues involving corporate and securities regulation and corporate governance practices. Continue Reading →

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Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime

Malcolm Gladwell’s book The Tipping Point: How Little Things Can Make a Big Difference discusses the “Broken Window theory.

If a window is broken and left unrepaired, people walking by will conclude that no one cares and no one is in charge. Soon, more windows will be broken, and a sense of anarchy will spread.

In the following post I argue that relatively minor problems, like how items left blank on a proxy are counted and how Broadridge labels shareowner proposals, sends a signal. Just like an abundance of graffiti tells you gangs are in charge, switching blank votes to management and relabeling shareowner proposals to gibberish tells you that shareowners are indifferent and that corporate managers have a clear invitation to more serious crime. I ask readers to take a simple action at the end of the post that, like fixing broken windows, could lead to the end of much more serious abuses.  Continue Reading →

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Former Corp Fin Staff Speaks

Don’t miss upcoming important events from TheCorporateCounsel.net. Tune in tomorrow, Wednesday, for the webcast – “The ‘Former’ Corp Fin Staff Speaks” – to hear former Senior Staffers from the SEC’s Division of Corporation Finance Brian Breheny of Skadden Arps, Marty Dunn of O’Melveny & Myers, Linda Griggs of Morgan Lewis and Dave Lynn of TheCorporateCounsel.net and Morrison & Foerster weigh in on what you need to be doing for the upcoming proxy season, and provide a “bring-down” of what’s happening now in Corp Fin. Continue Reading →

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Trading Cards

I’m on vacation but here’s part of Broc Romanek‘s post from yesterday on SEC Trading Commissioner Cards and a great cartoon by Hank Blaustein, which you can buy from Grant’s Interest Rate Observer for $150, signed by the artist, probably a better investment than most stocks.  Simon Billenness, Consultant, Corporate Responsibility and Socially Responsible Investment, tells me:

I actually have two of these SEC trading cards!  There were people distributing them outside Union Station last week.

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Shareowner Fiduciary Responsibilities

Lynn Stout has been in the forefront of those asking us to reexamine the role of shareowners. For decades, the possibility that minority shareholders in public firms might use their power in self-serving ways attracted little attention. However, she argues that  until recently minority shareowners have been largely passive.   When minority shareowners have become activists, most believe their primary goal was to improve the overall performance.

Stout has asked the we consider the fiduciary duty shareowners owe to each other. She points to the California Supreme Court case of Jones v. H.F. Ahmanson & Co. , which found:

Majority shareholders may not use their power to control corporate activities to benefit themselves alone or in a manner detrimental to the minority. Any use to which they put the corporation or their power to control the corporation must benefit all shareholders proportionately . . . .

Stout advocates changes to the law to address this increased risk more overtly by applying corporate fiduciary duties to shareholders more broadly. (Fiduciary Duties for Activist Shareholders, Iman Anabtawi & Lynn Stout, Stanford Law Review, 4/10/2010)

In particular, activist shareholder overreaching can be deterred by (1) interpreting loyalty duties to apply not only to controlling shareholders, who can dictate board decisions in all matters, but also to activist minorities who succeed in influencing management with respect to a single transaction or business decision, and (2) applying shareholder fiduciary duties not only in the traditional contexts of freezeouts and close corporations, but in any factual situation where a shareholder reaps a unique personal economic benefit to the detriment or exclusion of other shareholders.

I haven’t seen much effort to put Stout’s theory to practical application until reading Parsing Corp Fin’s Comment Letters: A Withdrawn “Shareholder Responsibility” Proposal, TheCorporateCounsel.net/Blog, 4/12/2010.

Last year, North American Galvanizing & Coatings filed this preliminary proxy statement with an innovative (and problematic) proposal that would restate the company’s certificate of incorporation with a provision that sought to make large shareholders “liable” for the consequences of voting in favor a shareholder proposal (see Proposal 5 on page D-34). In other words, the restated charter would have essentially saddled 1% or greater shareholders with the same responsibility as directors.

As noted in the company’s response, this proposal was withdrawn from the proxy statement in response to this Corp Fin comment letter. As the comment letter notes, this proposal would have to overcome a heap of state and federal law issues – and likely would be subject to a heated legal challenge from activists.

Great to see Broc Romanek covering this important exchange or I would have missed it. Expect to see more action in this arena over the coming years. I hope this is one of the topics Stout will address in her forthcoming book, Cultivating Conscience: How Good Laws Make Good People.

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Recent Reports from Broc

Broc Romanek posted the results of one of his recent surveys of upcoming proxy issues in their blog. About 33% of his mostly corporate respondents are worried or very worried about the impact of elimination of broker nonvotes. About 12% appear to be more likely to use a proxy solicitor during the 2010 season. Almost 55% have a majority vote standard and the movement still appears to be in that direction, although at a reduced pace.

Broc also posted the transcript for a webcast: “Pat McGurn’s Forecast for 2010 Proxy Season: Wild and Woolly.” One major point is that McGurn sees more focus  on making sure that true majority voting rules are in place at more companies going forward in order to be able to have a real say over directors.

Also posted at theCorporateCounsel.net is Inside Track with Broc: Mark Schlegel on Moxy Vote (1/11/10). Another good reason to subscribe. Speaking of MoxyVote, I got an e-mail from them notifying me that one of my brokers had agreed to direct future proxy ballots to MoxyVote.com, so I will soon be able to receive and vote them on that platform, as well as to get voting advice. Good one-stop shop.

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Apache v Chevedden: SEC Rules Don't Reflect Reality

I was delighted to see Broc Romanek coverage of the controversy surrounding Apache v Chevedden, although he did so in a members only area of theCorporateCounsel.net. I hope the case gets a lot of attention.

Yesterday, I was discussing a table I am working on that shows some of the rights denied to street name shareowners that are readily available to registered shareowners. Glyn Holton, Executive Director of the United State Proxy Exchange, pointed out something.  It is obvious those who wrote the regulations don’t know how the system works… or perhaps the rules haven’t been changed since the great immobilization, when almost all the shares were turned over to Cede & Co. and we started trading “security entitlements.”

Rule 14a-8 (b)(2)(i) says that “If you are the registered holder of your securities, which means that your name appears in the company’s records as a shareholder, the company can verify your eligibility on its own. Otherwise submit to the company a written statement from the ‘record’ holder of your securities (usually a broker or bank) verifying that, at the time you submitted your proposal, you continuously held the securities for at least one year.”

Of course, that is exactly what Chevedden did. He followed the rules and got a letter from his broker, Ram Trust. When Apache insisted that Ram Trust didn’t show on their records, he went another level up. However, Apache’s gotcha moment may have been in recognizing that the SEC rules are incorrect, since the rules assume that brokers and banks are “usually” record holders. They are not. Brokers and banks  also largely hold “security entitlements.” Cede & Co. holds the actual immobilized registered securities.

Please pull up the simple table I have begun constructing of  known instances where Street Name shareowners are being denied rights readily available to registered shareowners. (SECRuleStName2) Do you know of other similar situations? Please share your information by e-mailing James McRitchie at [email protected]

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