Tag Archives | Dodd-Frank

Interfaith Center on Corporate Responsibility: CHOICE Act

Interfaith Center on Corporate ResponsibilityThe Interfaith Center on Corporate Responsibility, a coalition of institutional investors representing $200 billion in invested capital that engage corporations on the environmental and social impacts of their operations, sent a letter yesterday to all U.S. Senators urging them not to pass the Financial CHOICE Act.

The proposed legislation, which passed the House and is currently pending in the Senate, would not only eviscerate critical financial reforms instituted in response to the 2008 financial crash, but would also eliminate the long-standing right of shareholders to exercise their voice regarding the governance of the companies they own. Continue Reading →

Continue Reading ·

Take Action: Comments on SEC Pay Ratio Rule Due 12/2/2013

The deadline for submitting comments on the SEC’s proposed pay ratio disclosure is coming up quickly on December 2, 2013. SEC general comment instructionsSubmit Comments on S7-07-13 Pay Ratio Disclosure. Get your comments in soon, before Thanksgiving. Another advantage to earlier submittal is that those who wait for the deadline are likely to borrow from previous submission. The earlier you submit, the more likely you are to influence others. For example, I am impressed by comments from the following: Continue Reading →

Continue Reading ·

Take Action: Comments on SEC Pay Ratio Rulemaking Due December 2

I-Want-Your-OpinionLast week the SEC finally proposed rules to require public companies to disclose the pay ratio between their CEO and their employees, as mandated by Dodd-Frank. Companies would have to disclose the ratio between CEO compensation and the median pay of their employees. Update: Comments due December 2nd.

As reported by the WSJ,  the ratio of “average” pay jumped from 51.6 in 1981 to 319.7 in 2011, according to data compiled by Kevin Murphy of the University of Southern California. The AFL-CIO sampled S&P 500 firms and claims the ratio went from 42 in 1980 to 380.

In response to complaints from multinationals that tallying pay for workers around the globe would be prohibitively expensive, the SEC’s draft largely leaves estimating and sampling methodology up to individual companies. Continue Reading →

Continue Reading ·

2013 Millstein Forum: Deconstruction of SIFIs and Capital Allocation

IraMillstein

Ira Millstein

Deconstruction of SIFIsThe following are cryptic notes and a few photos taken at the 2013 Millstein Forum held June 24 & 25 at Columbia Law School. Be sure to check out the Forum’s photo gallery for more photos, agenda, notes, etc.

Moderator: Ira M. Millstein, Chair, Center for Global Markets and Corporate Ownership at the Columbia Law School; Counsel, Systemic Risk Council; Senior Partner, Weil, Gotshal & Manges. Panelists were as follows: Continue Reading →

Continue Reading ·

Noteworthy Proposal to Cap Pay Ratio at Microsoft (MSFT)

qube-logomicrosoftA proposal by Qube Investment Management, which owns 10,208 shares of Microsoft ($MSFT), to cap pay has been challenged through the “no-action” process. See incoming correspondence to the SEC. The resolved clause of Qube’s proposal reads as follows:

Resolved: The the Board of Directors and/or the Compensation Committee limit the average individual total compensation of senior management, executives and all other employees the board is chanted with determining Continue Reading →

Continue Reading ·

Review: Whistleblower Laws

In The Successes and Failures of Whistleblower Laws, Robert G. Vaughn puts his life-long interest in perspective. A background with Nader’s Raiders studying federal agencies, work as an attorney representing whistleblowers, academic research and insights gained through study abroad facilitate Vaughn’s ability to evaluate the laws through theory and practice, stories and themes.

From Stanley Milgram to the Stanford prison experiments, My Lai Massacre and civil rights cases, Vaughn explores those who actually took up the adage, ‘question authority’ and the laws that evolved to protect them. He delves into famous cases, such as that of Frank Serpico and Daniel Ellsberg, as well as those far more obscure but also important. We also see how protections largely started in the civil service Continue Reading →

Continue Reading ·

Corporate Directors Forum: Day 1, Part 2

Below are some relatively quick notes I took at the Corporate Directors Forum 2013, held on the beautiful campus of the University of San Diego, January 27-29, 2013. See materialsCorporate Directors Forum 2013: Bonus Session, and Corporate Directors Forum 2013 – Day 1, Part 1.

The program was subject to the Chatham House Rule, so there will be little in the way of attribution below but I hope to provide some sense of the discussion. I throw in a lot of opinions. Some are those of panelists, some are mine, and some came from the audience.  I still get a little lost in some of the financial discussions but think we need to raise public understanding, so I don’t shy away from trying to learn or from offering opinions. I had fun, learned from various perspectives, renewed acquaintances and made some new ones. If corporate governance is your thing, I hope to see you there in 2014. Continue Reading →

Continue Reading ·

Event: The Role of Proxy Advisory Firms

The U.S. Chamber Center for Capital Markets Competitiveness (CCMC) will hold a half-day event on Wednesday, December 5, 2012 in Washington DC to take an in-depth look at the influence of proxy advisors and the state of corporate governance in the U.S. It would be nice to get some shareowners out to at least listen and report back to CorpGov.net. I would love to learn of their plans. Continue Reading →

Continue Reading ·

Corporate Governance Bites

Continuing challenges to exclusive forum bylaw provisions – Lexology

An increasingly popular trend in recent years has been the adoption by Delaware public companies of an exclusive forum provision in their bylaws. An exclusive forum provision generally provides for the Delaware Court of Chancery to be the exclusive forum for certain disputes (including derivative actions, breach of fiduciary duty claims, claims arising pursuant
to the company’s charter or bylaws and other shareholder litigation) against the company — and prohibiting such suits in other jurisdictions. Expected benefits cited by companies of adopting exclusive forum bylaw provisions include decreased litigation costs, avoiding parallel litigation in multiple jurisdictions and the predictability of Delaware courts. Continue Reading →

Continue Reading ·

Video Friday: Clawback Invoked

With the passage of the Dodd-Frank and the Sarbanes Oxley Acts, clawback policies have become increasingly prevalent among public companies. However, it is rare to find a company actually put a clawback policy into effect. Citing Equilar’s findings from the 2012 Clawback Policies Report, we review what a clawback policy is and we examine what triggered one major U.S. bank to put their clawback policy into action. Continue Reading →

Continue Reading ·

1st Dodd-Frank Whistleblower Report

Even thought the SEC’s final regulations for the Dodd-Frank whistleblower program just became effective on August 12, 2011, the agency has already filed its first report on the whistleblower program. During the first seven weeks of the program, the agency received 334 whistleblower tips.

The SEC itself cautions that “due to the relatively recent launch of the program Continue Reading →

Continue Reading ·

Pay Ratios and Ratcheting

Daniel F. Pedrotty, AFL-CIO, posted Why CEO-to-Worker Pay Ratios Matter to Investors to the Harvard Law School Forum on Corporate Governance and Financial Regulations on Thursday August 11. I’ve been meaning to mention it since then, mostly so that I have it file on my blog for future reference. I’ve got almost 16 years of corporate governance history on my blog (and more from my old site on my laptop, still waiting to migrate). This is one document I think people will be coming back to in the future.

Pedrotty’s post references Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires public companies to disclose the ratio of Continue Reading →

Continue Reading ·

The Role of Independent Directors in Corporate Governance: A "Must Have" Reference for Every Corporate Director

When I reviewed the first edition of The Role of Independent Directors after Sarbanes-Oxley by Bruce F. Dravis I called it an entire reference library in a thin volume. For the second edition, entitled The Role of Independent Directors in Corporate Governance, the number of pages has gone up from about 170 to 250 and the typefont is slightly smaller but the guidance remains the most readable I have encountered for providing directors, their advisors, and shareowners with a solid understanding of the primary legal and governance issues faced by independent directors.

The accompanying CD links to legal source material underlying the text, so those interested in drilling deeper are certainly given the resources. Upload the CD to your iCloud account so that you don’t have to go looking for it. Of course one thin volume and a CD can’t cover the entire universe of materials and the field is ever evolving, so minor sections, such as that on proxy access, are already slightly out-of-date. However, Dravis’ succinct coverage of a broad range of topics is unparalleled.

Here’s one I never noticed before: NYSE rules use the term immediate family member to include, as a disqualifying relationship for independence, “a person’s spouse, parents, children, siblings, mother and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.” Thank god you can still appoint your live-in maid to the board and have them be considered independent. Something Rupert Murdoch might want to consider? However, maybe such a person would be Continue Reading →

Continue Reading ·

Say-on-Pay Voting Standards Released

Yesterday, the United States Proxy Exchange (USPX) released standards for shareowners to use in making say-on-pay voting decisions.  “Say-on-pay” rules mandated by Dodd-Frank allow shareowners to express an opinion on executive compensation at annual meetings. But to make informed voting decisions, shareowners must first assess the compensation packages boards propose. That is not easy, since they tend to be very complex. Even sophisticated business professionals have a difficult time evaluating them, so how can average shareowners hope to do so?

This is not an idle issue. In the 2011 proxy season, institutional investors acted with breathtaking irresponsibility, collectively approving 98.3% of compensation packages. They did this as executive compensation continues to skyrocket. In 1965, CEO pay at large companies was 24 times the average worker’s wages. In 2010, that ratio was a staggering 343 to 1. Responding to the irresponsibility of institutional investors, John Harrington of Harrington Investments commented:

… if fiduciary duty, including ERISA, were truly enforced, lots of trustees, directors, administrators and managers would be in jail.

If shareowners — individual investors as well as small, medium and large institutional investors — do not start voting down the majority of compensation packages, we will have become part of the problem with executive compensation. A simple approach would be to vote against all executive compensation packages, but that would be self-defeating. If boards know compensation packages will be voted down no matter what they contain, they will have no incentive to make changes. Since say-on-pay votes are advisory, they would have no impact.

The USPX guidelines propose easy ways shareowners can review firms’ compensation packages and make reasonable say-on-pay voting decisions. The guidelines are predicated on the belief that some levels of compensation are so outlandish as to be unreasonable irrespective of a firm’s or CEO’s performance. The guidelines assist shareowners in deciding how and where to draw that line.

On November 11, 2010, the USPX released draft guidelines. We received many comments and we made several modest changes prompted by the feedback we received. Drafting the guidelines has been difficult. We have had to balance the inherent complexity of the compensation issue with the need for guidelines that are both simple and relevant.

The current guidelines apply only for compensation at large corporations. (Although during the 2011 season, I have been extending the logic of the Guidelines to small and medium corporations as well by voting down pay where NEO’s received more than median pay last year.) In future releases, we hope to extend the guidelines to small and medium corporations with more precise algorithms. In the mean time, we encourage shareowners to experiment with the guidelines and provide us with feedback on your own application and/or variation of our methodology. Please post feedback directly on the USPX website. Again, here is a direct link to the guidelines.

Continue Reading ·

Video Friday: Say-On-Pay Lawsuits, Crazy? + Daily Show Bonus

This Week in the Boardroom: 7/14/11 TK Kerstetter, President, Corporate Board Member; Scott Cutler, Executive Vice President, NYSE Euronext; and Stephen Lamb, Partner, Paul Weiss discuss the fact that losing a say-on-pay vote increases the likelihood of a shareowner lawsuit. See also Frivolous Say on Pay Lawsuits: Another Unintended Consequence.

This seems like a no-brainer to me. Over 98% of company say on pay votes passed. Isn’t it highly likely that those that fail such votes are more likely to be targeted? I think it is difficult for any company to truly show a direct link between CEO pay and performance. For those companies where Continue Reading →

Continue Reading ·

What Would Proxy Access Look Like if Done Right?

The Business Roundtable and Chamber of Commerce made their case and the Court found the SEC rulemaking on proxy access arbitrary and capricious “for having failed once again… to adequately assess the economic effects of a new rule.”

The SEC rules certainly didn’t come out the way Les Greenberg and I envisioned when we petitioned back in the summer of 2002. Ours was a simple proposal, summed up in one sentence:

The intended effect of the suggested modifications is that the solicitation of proxies for all nominees for Director positions, who meet the other legal requirements, be required to be included in the Company’s proxy materials.

I didn’t realize Just how bad the actual language is that got adopted until I read an illuminating paper by Jill E. Fisch of the University of Pennsylvania, The Destructive Ambiguity of Federal Proxy Access. I urge everyone who cares about this critical issue to read Fisch’s paper.  Continue Reading →

Continue Reading ·

Regulatory Reforms on Board Composition Have Been a Plus

New research from Cesare Fracassi of the Department of Finance at the University of Texas at Austin and Geoffrey Tate of the Department of Finance at the University of California, Los Angeles finds that board composition should be a continuing target of regulatory reforms.

Our results suggest that having directors with external network ties to the CEO may undermine the effectiveness of corporate governance.

We find that firms in which a high percentage of independent directors have external network ties to the CEO make more frequent acquisitions than firms with fewer CEO-director connections. Moreover, these acquisitions destroy shareholder value on average, particularly in firms which also have weak shareholder rights..

We find evidence that external governance mechanisms can substitute for weak internal governance. The negative reaction to merger bids among firms with many network ties between independent directors and the CEO and the reduction in Tobin’s Q are strongest in firms with weak shareholder rights.

More at External Networking and Internal Firm Governance, HLS Forum on Corporate Governance and Financial Regulation, June 29, 2011.

 

Continue Reading ·

Directors Should Thank Dodd-Frank

Eleanor Bloxham, a contributor to Fortune magazine, tells readers Why corporate directors should thank Dodd and Frank. With investors focused on “say-on-pay,” ISS recommendations against directors are down substantially.

Ture, but this isn’t likely to last. Most institutional investors seem to be taking a year off from voting against compensation committee members, giving them a free pass this year. Personally, I haven’t joined them. In fact, this is the first year I’ve been conscientiously voting against pay enabling compensation committee members. Expect an increase in such votes by institutional investors next year if companies ignore “say-on-pay” votes this year.

Directors should thank Dodd-Frank, not for temporarily distracting investors but for bringing better focus to their jobs… requiring that compensation committees be composed solely of independent directors and reducing conflicts of interest in compensation consultants, among many other reforms.

Continue Reading ·

CorpGov and Exec Pay

GovernanceMetrics International recently sampled large corporations and found that CEO pay jumped 27% in 2010 to a median of $9 million.

According to William Lazonick, professor at the University of Massachusetts, in 2010 the S&P 500 jumped 12.8%, capping a two-year gain of 39.3%. Companies in the S&P 500 boosted profits by 47% in 2010, not from boosting sales of goods and services, which rose only 7%, but by cost-cutting and layoffs, says Lazonick. (CEO pay soars while workers’ pay stalls, USA Today 4/1/2011) ) Continue Reading →

Continue Reading ·

SWOP Reaches Tipping Point

The debate over the best frequency for “say on pay” votes has reached a tipping point, as a majority of S&P 500 and Russell 3000 firms have urged their investors to support annual advisory votes on executive compensation.

As required by the Dodd-Frank Act, this year’s corporate proxy statements include a “say when” vote that asks investors to express their views on whether advisory votes on compensation should be held every year, every two years, or every three years. The percentage of annual recommendations has been growing in recent weeks, as more boards have heeded the large majority votes by investors for annual votes at early season meetings.

So far, 105 (60.7 percent) of the 173 large-cap firms that have filed proxy materials had endorsed annual votes, as compared to the 56 companies (32.4 percent) where management endorsed triennial votes, according to ISS data as of March 22. Seven firms have favored a biennial frequency, while five issuers made no recommendation.

via A Tipping Point on Pay Vote Frequency – Governance.

See also Shareowners Going “Off the Reservation” on SWOP and Addressing CEO Pay.

Continue Reading ·

Deregulation of Derivatives Caused the Crisis

Lynn A. Stout argues the credit crisis was not due primarily to changes in the markets, it was due to changes in the law, specifically the Commodities Futures Modernization Act (CFMA) of 2000’s sudden and wholesale removal of centuries-old legal constraints on speculative trading in over-the-counter (OTC) derivatives.

Derivative contracts are probabilistic bets on future events. They can be used to hedge, which reduces risk, but they also provide attractive vehicles for disagreement-based speculation that increases risk. Thus the social welfare consequences of derivatives trading depend as an empirical matter on whether the market is dominated by hedging or speculative transactions. The common law recognized the differing welfare consequences of hedging and speculation through a doctrine called “the rule against difference contracts” that treated derivative contracts that did not serve a hedging purpose as unenforceable wagers. Speculators responded by shifting their derivatives trading onto organized exchanges that provided private enforcement through clearinghouses in which exchange members guaranteed contract performance. The clearinghouses effectively cabined and limited the social cost of derivatives risk.

These traditional legal restraints on OTC speculation were systematically dismantled during the 1980s and 1990s, culminating in the 2000 enactment of the CFMA. That legislation set the stage for the 2008 crises by legalizing, for the first time in U.S. history, speculative OTC trading in derivatives. The result was an exponential increase in the size of the OTC market, culminating in 2008 with the spectacular failures of several systematically important financial institutions (and the near-failures of several others) due to speculative derivatives losses. In the wake of the crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Title VII of the Act is devoted to turning back the regulatory clock by restoring legal limits on speculative derivatives trading outside a clearinghouse. However, Title VII is subject to a number of possible exemptions that may limit its effectiveness, leading to continuing concern over whether we will see more derivatives-fueled institutional collapses in the future.

Stout concludes, “the hypotheses that legalizing OTC derivatives trading reduced systemic risk, or provided significant liquidity benefits, should be rejected as at best wishful thinking.” Stout, Lynn A., The Legal Origin of the 2008 Credit Crisis (February 25, 2011). UCLA School of Law, Law-Econ Research Paper No. 11-05.

Continue Reading ·

Corporate Governance Legal Requirements

Morgan, Lewis & Bockius LLP produced a good legal primer, Corporate Governance: An Overview of Public Company Requirements, last month. Read it now before it is out of date. Covers Sarbanes-Oxley, Dodd-Frank, and listing requirements in eleven sections:

  1. Director Independence
  2. Audit Committees
  3. Compensation Committees
  4. Nominating Committees
  5. Compensation
  6. Codes of Conduct
  7. Certifications
  8. Directors/Officers
  9. Disclosure
  10. Foreign Issuers
  11. Miscellaneous

Great resource for any corporate governance library. Hat tip to long-time stakeholder Ralph Ward and his Boardroom Insider for bringing to our attention myCorporateResource.com, which compiles client alerts.

Continue Reading ·

SEC Proposes Whistleblower Regulations

SEC Proposes New Whistleblower Program Under Dodd-Frank Act (Press Release No. 2010-213; November 3, 2010. Section 922 of the Dodd Frank bill gives the SEC the authority to make awards to whistleblowers under regulations prescribed by the SEC of  not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions; and not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions. See proposed rule and soon comments here under 34-63237.

Under the proposed rules, a whistleblower is a person who provides information to the SEC relating to a potential violation of the securities laws. To be considered for an award, a whistleblower must

Voluntarily provide the SEC …

  • In general, a whistleblower is deemed to have provided information voluntarily if the whistleblower has provided information before the government, a self-regulatory organization or the Public Company Accounting Oversight Board asks for it.

… with original information …

  • Original information must be based upon the whistleblower’s independent knowledge or independent analysis, not already known to the Commission and not derived exclusively from certain public sources.

… that leads to the successful enforcement by the SEC of a federal court or administrative action …

  • A whistleblower’s information can be deemed to have led to successful enforcement in two circumstances: (1) if the information results in a new examination or investigation being opened and significantly contributes to the success of a resulting enforcement action, or (2) if the conduct was already under investigation when the information was submitted, but the information is essential to the success of the action and would not have otherwise been obtained.

I understand that some in the business community had asked for much more restrictive rules.

  1. Require informants to have first told the company hotline of the problem before the SEC;
  2. Once the employee has provided the SEC information, they should be prohibited from providing any further information within the company; and
  3. Prohibit a fiduciary such as a director from informing the SEC of fraudulent behavior.

Basically, they were telling the SEC that if employees have information related to a fraud being perpetrated on investors, that the person should be silenced. Some hotlines link back to the company’s general counsel, the very person responsible for defending the company.  Will they really protect innocent employees who report a potential fraudulent activity?

Once information has been provided, agencies might want the employee to wear a wire tap to gather additional information. Will this be prohibited?

If a director, who has a fiduciary obligation to investors, is aware of fraud, why is that something that should be kept from the SEC and stockholders?

Yes, these whistleblower regulations will make it difficult to operate meaningful company hotline programs, which aren’t going to offer anywhere near the monetary rewards of the SEC program. I’m not sure what the answer is, but it is not caving to suggestions like those listed above. Shareowners should carefully review the proposed regulations and should monitor comments as they are submitted.

For more information, see SEC Proposes Rules For Whistleblower Program (WSJ, 11/3/2010).

Continue Reading ·

Bainbridge Guide to Dodd-Frank

In his paper, The Corporate Governance Provisions of Dodd-Frank, Stephen M. Bainbridge  provides a brief overview of the seven principal corporate governance provisions of The Wall Street Reform and Consumer Protection Act of 2010 (better known as “The Dodd-Frank Act”).

  1. Section 951 creates a so-called “say on pay” mandate, requiring periodic shareholder advisory votes on executive compensation.
  2. Section 952 mandates that the compensation committees of reporting companies must be fully independent and that those committees be given certain specified oversight responsibilities.
  3. Section 953 directs that the SEC require companies to provide additional disclosures with respect to executive compensation.
  4. Section 954 expands Sarbanes-Oxley Act’s rules regarding clawbacks of executive compensation.
  5. Section 971 affirms that the SEC has authority to promulgate a so-called “proxy access” rule pursuant to which shareholders would be allowed to use the company’s proxy statement to nominate candidates to the board of directors.
  6. Section 972 requires that companies disclose whether the same person holds both the CEO and Chairman of the Board positions and why they either do or do not do so.
  7. Section 989G affords small issuers an exemption from the internal controls auditor attestation requirement of Section 404(b) of the Sarbanes-Oxley Act.

The paper elaborates further on each provision and provides a useful guide.

Continue Reading ·

Don't Miss Opportunity to Level Playing Field in Corporate Elections

As many of you know, I petitioned the SEC last year to change the rule that allows blanks on a partially filled proxy or voter instruction forms (VIFs) to go to management and have also complained to the SEC about Broadridge’s failure to impartially identify proxy proposals on VIFs (see Investors Against Genocide Fighting American Funds, Broadridge and Vague SEC Requirements: More Problems Solved Using Direct Registration and “Corrected” Ballot at Altrea Tips Votes to Management).

At every turn, the deck seems stacked against retail shareowners, in favor of entrenched managers and boards. Now, with the enactment of Dodd-Frank, the SEC is seeking comments on provisions that require rulemaking by the Commission. Additionally, the SEC issued a Concept Release on the U.S. Proxy System with comments due October 20. These opportunities for comment offer our best chance to finally level the playing field in these areas.

Attached (at bottom of post) is a copy of the letter I sent to [email protected] twice yesterday, under two subject fields. One subject was “DF Title IX – Executive Compensation – voting by brokers.” The other subject line was “S7-14-10.” I hope some of you will also object to blanks fields going to management and VIFs that do not impartially identify proxy proposals. Remember, comments are due tomorrow, October 20th.

SEC. 957 of Dodd-Frank prohibits granting discretionary authority to brokers with respect to directors and executive compensation or “any other significant matter, as determined by the Commission.” If beneficial owners fail to provide instructions on how their proxies should be marked with respect to “significant” matters, no one should be empowered to vote on their behalf. The intent of that prohibition should extend to management in the case of blanks items on a partially completed proxy or VIF, as well as  brokers completing a totally blank proxy or VIF.  The SEC should use its rulemaking powers, not only to conform the provisions of Rule 14a-4 to the mandated and implied intent of Dodd-Frank but should also make a determination that all proxy matters are “significant.” After the complicity of auditors in abusive practices, such as those uncovered at Enron, no proxy item is insignificant.

The integrity of the voting system is critical. The SEC’s current rules send the wrong message to shareowners. They say, “don’t worry about voting. If you fail to submit a vote at all or you leave an item blank, we will allow your votes to be assigned to someone else… but not to someone of your choosing” regardless of possible conflicting or nonaligned interests of brokers, banks and corporate management.

The current rule does not reinforce a robust market or vigilance by shareowners. It does not send a message that voting is important. It is no wonder that shareowners then become shareholders, with only entitlements and no responsibilities, much like gamblers with betting slips. The Commission should encourage responsible ownership, not gambling.

The SEC should regulate the power relationships between actors in the market to provide a level playing field, not tip the balance to one party when the other fails to act. Instead, the SEC should remind each party of the importance of their respective roles. The current Rule 14a-4 misaligns interests by yielding disproportionate control to brokers, bankers, managers and boards, instead of educating and engaging shareowners.

(Thanks to the many individuals who reviewed and provided comments on the attached recommendations to the SEC.) blankvotesVIFs10-18

It should be noted that you can avoid much of the blank vote issue right now by always voting on MoxyVote.com. They use  Broadridge’s electronic voting platform too and can’t submit a VIF back to Broadridge without populating (gathering a vote from a user) every item on a ballot.  However, their system lets you set up your own default, instead of automatically having your blank vote go to management.

To do so, simply log in to your account at MoxyVote, go to:

  1. My Profile
  2. Down the left column, hit the button that says “Prioritize and Manage”
  3. In about the middle of the page, you’ll see “Default Voting Positions” with the choice of voting
    1. abstain
    2. with the board’s recommendation
    3. against the board’s recommendation

I’ve got mine set to abstain whenever I leave an item blank. You may want to set yours differently. Using MoxyVote, at least you have a choice right now. You won’t find that at ProxyVote.com, the platform that most brokers send you to. Since most shareowners still use ProxyVote, we still need a change in the rules by the SEC regarding how blank votes are counted. Additionally, VIFs still need to follow the rules applicable to proxies, like providing an unbiased description of each item to be voted on. These descriptions will continue to slant votes to management unless the SEC requires a level playing field, so it is important to comment to the SEC about these issues.

Continue Reading ·

Financial Sustainability: Restoring Market Stability, Corporate Value & Public Trust (ICGN Mid-Year 2010)

Disclaimer: Given Dodd-Frank, proxy plumbing and all those comments I want to provide the SEC, the report below doesn’t do the ICGN Mid-Year Conference justice.  I wrote this up more than a week later with poor notes and memory. Comments, corrections and substitute photos are solicited.

Sharing Perspectives Across the Atlantic. Phil Angelides, Lord McFall and moderated by David Pitt-Watson.

The Financial Crisis Inquiry Commission will report in December to give an unbiased historical accounting of the causes of financial crisis. It will be out in book form but will also be available through download.

Phil Angelides

$11 trillion in wealth was wiped away. The market took until 1954 to get back to the levels of 1929. Let’s hope this one doesn’t take as long but, more importantly will we learn the lessons necessary to prevent or minimizes future bubbles?

It was a failure of accounting and deregulation. Too many were rewarded based on volume not on performance and their was no continuity in risk (they thought) after all the slicing, dicing and creative complexity.

Lord McFall

Rewards can’t be asymmetric and function properly. This was not a natural storm; the clouds were seeded. Signs were there, such as a 2004 warning from the FBI about a housing fraud epidemic, but they were glossed over. Now, our remaining investment banks are largely trading banks, not focused on generating capital but on gaming the markets. The betting market is much larger than the real economy… with more than 85% of transactions being synthetic.

Dodd-Frank requires the investment banks to hold 5% of the securities they sell but I’m not sure what good that does since that portion of their business is now minor. We need to rethink the role of finance in our economy. Continue Reading →

Continue Reading ·

Powered by WordPress. Designed by WooThemes