Retail shareowners own about 1/3 of shares traded in the United States but vote only about 1/3 of the shares we own. Moreover, when we do vote, we frequently do so by blindly or unknowingly voting with management. In Part 1 and Part 2 of this series, I explored five internet platforms that were designed to increase knowledgeable participation by retail shareowners. In this post I start to take a look at the Australian Shareholders’ Association (ASA) as a potential model for the United States. The following is largely drawn from Wikipedia and from the ASA’s internet site. Continue Reading →
Tag Archives | education
James McRitchie, the publisher of Corporate Governance and one of three retail shareowners accused in the New York Times of holding Corporate America ‘hostage,’ will be in Los Angeles September 29 through October 1 attending the Council of Institutional Investors Fall 2014 Conference.
I am eager to meet with readers to discuss activist corporate governance strategies and how we can work together. Outlined below are some projects I’m working on. If you’d like to discuss any of them or other possible areas for cooperation, please contact me prior to the conference. Additionally, I am always interested in guest posts. Reach out to thousands, especially our under-covered readers in Beijing and India. Continue Reading →
Broc 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 2012 Cambridge University launched a Masters degree in Corporate Law (the MCL), which offers students the opportunity to engage in detailed study of the legal and regulatory framework within which companies are governed and financed.
The MCL, a full-time nine-month program, is taught by the Cambridge Law Faculty’s team of corporate lawyers, widely recognized as one of the strongest in the corporate law field. The MCL, the first entirely new degree in Law to be established by Cambridge University since the nineteenth century, has been designed to combine Continue Reading →
I’ve received praise before: CII said my petition to the SEC on proxy access “re-energized” the debate on that subject, Lexis-Nexis subscribers listed my site among the top 25 business blogs and the NACD put me on a list of “people to watch.”
However, never have I felt so honored as when I heard Bob Monks publicly list my website (corpgov.net) and my twitter account (corpgovnet) among resources worth following. If I were an actor, it would be like getting acknowledgement from Daniel Day-Lewis and Meryl Streep! And to top it off, to be in such company as those other resources Bob mentions! Wow! 2013 is starting out rather nicely. I’d better ask my wife to give me a smack, so my head doesn’t get too big. Continue Reading →
The International Finance Corporation (IFC), a member of the World Bank Group, in conjunction with the International Center for Journalists, has produced A Guide to Reporting on Corporate Governance designed for reporters and editors with experience covering business and finance. The goal is to help journalists develop stories that examine how companies are governed, and spot events that may have serious consequences for the company’s survival, shareholders and stakeholders. Continue Reading →
Mason Morfit, a partner at ValueAct Capital and one of the most successful shareholder activists in the US, according to the Rock Center announcement, and Abe Friedman, of CJB Capital Management (former Global Head of Corporate Governance & Continue Reading →
TheShareholderActivist.com™ is a new source for information and advice to facilitate responsible shareholder activism. The site includes tools, tactics, and techniques to help retail investors fully exercise their rights in publicly traded Continue Reading →
Trust and Human Resource Management, edited by Rosalind Searle and Denise Skinner highlight trust as key to human resource management (HRM) from pre-entry to post-employment. The collection will be of great value to academics in the HR field and to practitioners interested in enhancing trust levels in their organizations.
Trust has long been associated with organizational effectiveness, efficiency and performance that can more easily grow in a climate of high motivation, Continue Reading →
To be a company director, you need to be over 18, not insane (or at least found to be insane by a judge), and not bankrupt. That’s it. You can sit on a major board of directors, and not know anything about the company, its industry, or even know how to read a financial statement.
When you see an accountant, a doctor, an engineer or a lawyer, that person has a rigorous code of professional practice with which he or she must comply, ongoing professional Continue Reading →
Recently, ICGN held their annual conference in Paris. From the Twitter feed, it appears I missed a good one. (see ICGN Via Twitter) I’ve already mentioned Jon Lukomnik’s appeal to look again at the idea that shareowners’ interests and executives’ can be aligned through compensation strategies.
I think one origin of our errors was revising the tax code so that executive compensation above $1 million is only a tax deductible expense if performance based. The result has been, as Lukominik observes, that compensation plans have taken on the characteristics of “a slot machine: They pull a lever and three years later out comes a trickle of coins or a fountain of folding money.” This is a topic worthy of much discussion.
Another truthsayer at the conference was Robert A.G. Monks, whose L’Appel can be read as quickly as fast food but provides nutritional value of a much higher order. Bob lays out a number of observations. I’ll just list a few: Continue Reading →
I haven’t read the new Guidebook but I see that Corporate Counsel invited Weil, Gotshal & Manges partner Holly Gregory, who co-chaired the committee that authored the book talk about it with Spencer Smul of Estee Lauder and Lynn Stout of UCLA School of Law who did not.
Asked what was most useful about the new version, Stout points to provisions outlining legal, operational, and reputational risk. Smul agreed, and added he liked the new appendices and resources for additional information.
The most important new information for in-house lawyers for Stout was addressing:
what it means to owe a duty to the corporation and its shareholders. There is a tendency, especially in the business media, to assume that owing a duty to the shareholders is the same thing as maximizing share price. I think the Guidebook does a good job of making the very basic point that the concept of shareholder value is in many ways a fiction because different shareholders have different values. Some are focused on short-term stock price, some on long-term returns, some shareholders are diversified, some have social or political interests, and some do not.
(more at A How-To Guide For Corporate Boards And Counsel, Connecticut Law Tribune, 7/25/2011)
The IRRC Institute announced a competition for research that examines the interaction of the real economy with investment theory. Two papers – one academic and one practitioner – will receive the new “IRRC Institute Research Award” along with a $10,000 award. Of course, we would like both prizes to go to CorpGov.net readers. One of many books you might want to read in preparing your paper is Corporate Valuation for Portfolio Investment: Analyzing Assets, Earnings, Cash Flow, Stock Price, Governance, and Special Situations by Robert A. G. Monks and Alexandra Reed Lajoux.
The following panel of renowned judges with broad finance and investment experience will carefully review submissions and select two winning papers: Continue Reading →
Yes, it is an ad… but a good one. Maybe this will help more directors become Continue Reading →
Like many, I read that a proposal at McDonalds to halt marketing to kids, retire Ronald McDonald, and report on links between fast food and children’s health, failed… winning only 6% of shares voted. Every change has to start somewhere.
However, I also learned from a reliable source that a proposal submitted by Florida SBA, with the assistance of the American Corporate Governance Institute (ACGI) to declassify the board won 77%. It was a real cooperative effort, with Dan Nielsen, the Director of Socially Responsible Investing at Christian Brothers Investment Services, presenting the proposal at the meeting.
It is great to see shareowners working together and even more exciting to learn about ACGI, which I see Nell Minow already discussed a bit back on May 10. Minow writes a little on the evolution of classified boards, cites a study that finds they insulate directors while providing no apparent benefit and discusses the campaign by Florida SBA and the Nathan Cummings Foundation to address many of the 10% of large Continue Reading →
On “This Week in the Boardroom,” hosts TK Kerstetter, President, Corporate Board Member, and Scott Cutler, Executive Vice President, NYSE Euronext, announced the launch of the NYSE Board Education Program which is designed to provide voluntary education for public and private company board members and offers core information and critical updates through Corporate Board Member conferences, events, publications, and online resources.
On April 19, the Securities and Exchange Commission published a request for public comment on the effectiveness of existing investor education efforts as part of a review mandated by the Dodd-Frank Act.
Section 917 directs the SEC to conduct a study of retail investors’ financial literacy and submit its findings to Congress by July 21, 2012. Among other things, Section 917 states that the study must identify “the most effective existing private and public efforts to educate investors.”
The Commission is seeking public comment to better understand the details and effectiveness of current programs, and help ensure that the study includes all Continue Reading →
[email protected] announced the latest addition to their network –- [email protected] High School. The site offers articles, interviews, a video glossary of business terms, an interactive stock market game and other features, all designed to teach high school students more about business and finance. The free site, in Spanish as well as English, also includes a portal where teachers can share lesson plans, blogs and other resources relevant to their business curricula.
No, it isn’t strictly corporate governance but it is nice to see at least some content in that area being pushed down to the high school level. We’ve added a link on our Classes & Research page under the Education tab.
The Weinberg Center for Corporate Governance has won funding to begin a yearlong fellowship for research into such issues as CEO pay and has created an online training course for board directors.
The Edgar Woolard Fellowship (funded by the Investor Responsibility Research Center) — named in honor of the former DuPont Co. CEO — will fund the research of 21-year-old university senior Craig Ferrere, a finance major who is looking to find better ways of matching executive pay with performance.
Ferrere said he aims to find analytical tools that measure an executive’s worth more objectively and more accurately than peer comparisons, which has been a primary cause of escalating pay.
Earlier this year, Charles Elson, director of the Weinberg Center, helped put together an Internet multimedia course on the complex legal and philosophical dynamics of being a board member. “How to Be(come) a Director” was commissioned by the National Association of Corporate Directors, with the goal of teaching the essentials of board governance: ethics, accountability and competence.
The self-paced course costs $395, and includes video presentations from Elson and other experts. In today’s corporate world, a savvy, capable board is critical, Elson said, but directors can come to the role without adequate appreciation for the balancing act they’ll be expected to pull off.
On This Week in the Boardroom (TWIB), host TK Kerstetter, President of Corporate Board Member, sat down with Pat McGurn, Special Counsel, RiskMetrics Group, to debate and discuss the importance of what’s on the horizon for continuing board education.
CalPERS. A report from consultant Wilshire Associates found that activist involvement by CalPERS increased returns at many of the 142 “Focus List” companies. Prior to the pension’s involvement, the companies’ returns averaged 83.3% below their various benchmarks; afterward they yielded returns 12.7% above the benchmarks. Although the cumulative 12.7% is not as high as past results, their corporate governance program still much more than pays for itself. From the report:
Most investment resources in the industry continue to be focused on identifying small misvaluations in publicly traded stocks. This is, perhaps, unfortunate since investors are not earning a satisfactory return on the manager fees and brokerage costs they pay, given the evidence showing that the public stock markets are fairly efficiently priced. However, the evidence is equally clear that many corporate assets are poorly managed and that resources spent on identifying and rectifying those cases can create substantial opportunity and premium returns for active shareholders.
CalPERS announced several actions to address concerns raised by the City of Bell salary controversy, including:
- Posting audit reviews of public agency membership and payroll data submitted to the retirement system
- Highlighting significant findings of public agency reviews and regularly report them to the CalPERS Board
- Establishing procedures and guidelines for CalPERS working-level staff to notify supervisors and senior management of unusually high compensation and salary increases such as those that occurred in Bell
In addition, CalPERS helped establish the Public Employee Compensation and Benefits Task Force, which includes CalPERS staff and representatives public employer organizations, League of California Cities, California State Association of Counties, employee and labor organizations, legislative staff and other, focusing on:
- Options for providing greater public disclosure of public employee compensation, benefits, and other information related to total employee compensation and benefits
- Options regarding caps on total compensation that can be considered for retirement purposes
- Options for mitigating the impact of excessive salaries on the retirement costs of a public employee’s previous public employers and other public agencies in the same liability risk pool
CalPERS had previously announced plans to review the compensation of CalPERS-covered employees who earn $400,000 or more per year in salary. Phase two of the review will look at CalPERS member salaries of $245,000 per year and above.
On September 7, 2010, from 6:00 p.m. – 7:30 p.m., the Sacramento Central Labor Council and PERSWatch.net will host a “CalPERS Candidates’ Forum,” moderated by the League of Women Voters of Sacramento County. The forum will be held in the CalSTRS Boardroom at 100 Waterfront Place in West Sacramento, next to the pyramid. We’re trying to arrange for free parking but haven’t confirmed that yet. This is your opportunity to meet and question the candidates. A video of the forum will be archived on the CalPERS website.
Citigroup. Nice item by David Reilly in the WSJ (Citigroup’s Paltry Debt Penalty, 8/17/10) He sides with U.S. District Judge Ellen Segal Huvelle who refused the SEC’s proposed $75 million settlement with Citigroup over the bank’s failure in 2007 to disclose sub-prime mortgage risks. Goldman Sachs recently paid $550 million for a lesser offense but the SEC only wants $75 million from Citigroup. Why go after only two Citigroup executives for the paltry sums of $100,000 and $80,000 and why should shareowners pay for the execs alleged missteps?
The problem is Citigroup shareholders, under current rules, couldn’t necessarily oversee their company. That is partly due to the difficulty in challenging board directors… For shareholders to be held accountable, the SEC has to let them act more like owners.
Unfortunately, even under the SEC’s most probable proxy access rules shareowners may just have a better view of wrong doing and their money sliding away, since even under the best of circumstances they will only get to nominate 1/4 of the board.
Climate Change. With extreme weather mounting and Congress dithering, WRI report outlines what we can do now to reduce GHGs. The summary, “Everything You Need to Know About Global Warming in 5 Minutes,” by Boston investment manager Jeremy Grantham of GMO does a great job of ticking off the causes, consequences, and controversies surrounding climate change. (The Go-Getter Approach to Climate Change, 17 August 2010, MurninghanPost.com.
Cooperatives. If sustainable technologies are about the what of the living economy, local and shared ownership designs are about the who: who will own the productive capacity of the nation, who will control it, and who will benefit from the wealth created. Minwind Energy is an example of shared ownership, an emerging, broad category of ownership design in which ownership is shared among individuals (as in cooperatives or employee-owned firms) or between individuals and a community organization (as in a community land trust, where families own their homes while a nonprofit owns the land they stand on). (A Different Kind of Ownership Society, via Yes! Magazine, Marjorie Kelly and Shanna Ratner, 8/3/10)
Corporate Governance. It is no longer realistic to look to government to rectify problems caused in the private sector, or to simply ignore such problems and their broader consequences. We all need to look for innovative ways to avoid such problems, such as using the governance process to do so. (Why Corporate Governance Matters to Everyone, Marty Robins, The Huffington Report, 8/17/10)
With the specter of dramatic regulatory changes hovering over them, U.S. public companies have been acting aggressively to streamline corporate governance practices and establish their executive compensation priorities, according to Shearman & Sterling’s eighth annual Corporate Governance Surveys of the 100 largest U.S. public companies. Key corporate governance findings include:
- Majority voting in uncontested director elections has been implemented in some form by 82 of the 100 largest companies, up from 75 last year and from just 11 as recently as 2006.
- Despite amendments to NYSE Rule 452 implemented last year (eliminating broker discretionary voting in director elections), no director standing for reelection at one of the 100 largest companies failed to receive majority support this year.
- The number of Top 100 Companies at which the CEO is the only member of the board of directors who is not independent increased significantly, rising to 59 this year from 49 last year.
- The number of Top 100 Companies with classified boards, of which there were 54 in 2004, declined to only 20, and of those 20, more than one-third were either in the process of declassifying their boards or received approval from their shareholders this year to do so.
- Seventy-one companies disclose they maintain an executive compensation clawback policy (an increase from 56 companies in 2009 and 35 in 2007 — representing a 103% increase in four years). This will become increasingly significant, as the new Dodd-Frank Act mandates clawbacks if a material restatement would have affected the amount received.
- There was a decrease in the overall number of compensation-related shareholder proposals; however, advisory say-on-pay policies continued to be the most prevalent proposal. In addition, the survey suggests that companies cannot assume that their say-on-pay advisory resolutions will pass. For example, three public companies (including one Top 100 Company) failed to win majority support in the 2010 proxy season.
Economy. Biflation, generally defined as inflation and deflation occurring simultaneously in different parts of the economy—specifically, rising prices for commodities that trade in global markets and falling prices for things bought with credit domestically, like homes and automobiles. (Is ‘Biflation’ Real?, Newsweek, 8/16/10)
Electronic Board Meetings. Despite the obvious advantages of using technology and moving to electronic meeting management, few companies have achieved buy-in and taken board meetings to an electronic platform. Some have, however – and South Jersey Industries (SJI) is one such early adopter. (Best practice: establishing an electronic meeting management process, Corporate Secretary, 8/17/10)
Global Corporate Citizenship. Prof. Surinder Pal Singh outlines how global corporate citizenship rests on four pillars: values; value protection; value creation; and evaluation. These four pillars not only underpin the long-term success and sustainability of individual companies, but are also a major factor in contributing to broader social and economic progress in the countries and communities in which these companies operate. Along with good governance on the part of governments, they offer one of our greatest hopes for a more prosperous, just and sustainable world. (The Concept of Corporate Citizenship in a Global Environment, Political Wag, 8/17/10)
As the US markets continue to debate whether we are still in a recession, on the road to recovery, or headed for a double recession, the Indian government is busy imposing regulations to boost corporate philanthropy and social responsibility. In an economy that continues to post steady growth despite upheavals across Europe and the U.S., India Inc. is increasingly facing scrutiny for its role—or notable absence—in the social and environmental growth of the country. (Forcing CSR in India: Is Regulation the Answer?, The CSR Blog, 8/16/10)
Green Chemistry. Two California departments within Cal/EPA are working to identify “chemicals of concern” in consumer products. Eventually, they will push companies to substitute less toxic chemicals and maybe even ban some of those that are killing us now.
Greenest Campuses. 162 American colleges and universities rated by the Sierra Club. Also includes first steps on Chinese campuses.
Proxy Plumbing. The Shareholder Communications Coalition consisting of the Business Roundtable, National Association of Corporate Directors, National Investor Relations Institute, Society of Corporate Secretaries and Governance Professionals, and the Securities Transfer Association prepared a PowerPoint presentation to explain its recommendations for reforming the proxy voting and shareholder communications rules. “This presentation document is intended to help public companies, investors, and other interested parties understand how the proxy system can be improved to benefit all stakeholders.” This is an important initial assessment of feedback on the SEC’s proxy plumbing concept release. I suspect I will disagree with several parts but I heartily endorse their call to:
- Do away with the VIF and replace it with a proxy card.
- Pass voting authority directly to beneficial owners.
- Enable beneficial owners to transfer their proxy authority back to their brokers or bank (e.g. client directed voting) or to another third-party.
Research in Progress. Stanford’s Rock Center for Corporate Governance and the Corporate Secretary’s organization are conducting a survey “to get some hard data and research on what companies are actually doing and hopefully figure out once and for all what elements of governance reform actually lead to improvements and which do not.”
SEC. Rebecca Files finds that cooperation with the SEC through forthright disclosure of a restatement (e.g., disclosures reported in a timely and visible manner) increases the likelihood of being sanctioned, perhaps because it improves the SEC’s ability to build a successful case against the firm. However, both cooperation and forthright disclosures are rewarded by the SEC through lower monetary penalties. (SEC Enforcement: Does Forthright Disclosure and Cooperation Really Matter?, SSRN, 7/14/10)
The SEC settled its suit with New Jersey over securities fraud by issuing a cease-and-desist order, which the state accepted without admitting or denying the findings. No penalties were imposed. According to the SEC NJ claimed it had been properly funding public workers’ pensions when they had not. The SEC has a special unit looking into more public pension disclosures. (Pension Fraud by New Jersey Is Cited by S.E.C., NYTimes, 8/19/10)
The S.E.C. said the fraud began in 2001, when New Jersey increased retirement benefits for teachers and general state employees. New Jersey did not have the money to put behind the new benefits, but every year after that, the state treasurer certified that the pensions were being funded according to the plan.
The SEC finally confirmed they will consider adopting proxy access rules on 8/25. Still no word on threshold, holding period, small issuer exemption. next Wednesday, August 25th at an open Commission meeting. No word on how the big question marks – the ownership threshold and holding period – will be resolved. Sunshine notice. The U.S. Chamber of Commerce has retained Eugene Scalia, the son of U.S. Supreme Court Justice Antonin Scalia, to review the forthcoming SEC rules for a potential legal challenge. (SEC Plan to Pry Open Corporate Boards May Face Challenge, Bloomberg, 8/11/10) J. W. Verret of the George Mason University School of Law has already proposed more than a dozen way to circumvent the law in his paper Defending Against Shareholder Proxy Access: Delaware’s Future Reviewing Company Defenses in the Era of Dodd-Frank.
Shareowner Engagement. With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, power has shifted to shareholders. The 2011 proxy season is a game-changer as the rules require boards to seek shareholder support for compensation programs and even directorship candidates. (Directors, Do You have a Shareholder Engagement Program?, Karen Kane Consulting, 8/12/10)
United States Proxy Exchange (USPX). The USPX is a non-government organization dedicated to facilitating shareowner rights, primarily through the proxy process. They are structured as a chamber of commerce but unlike a typical chamber of commerce—which represents corporate executives—the USPX represents shareowners. Membership includes both institutional investors and sophisticated retail investors—many of whom have finance, corporate or legal expertise from their careers. Together, they work to promote an environment where engaged shareowners create value through the corporations they own. Check out their new website. Please join me; sign up for membership.
Join The Corporate Library on April 28 for a free webinar with Chief Analyst and co-founder, Ric Marshall. New SEC proxy disclosure rules and changing director election standards have greatly expanded the ability of shareholders to influence election outcomes for individual corporate directors, but for many investors they have also increased the complexity and uncertainty of the voting process.
Current subscribers of The Corporate Library’s Board Analyst database will benefit by learning more about the individual director screens employed by our top analysts in evaluating individual director and board effectiveness, while non-subscribers will have an opportunity to better inform their own analysis and decision-making by learning more from these same insights. Time: 1:00 – 2:00 PM EDT. Register; I certainly did.
The Rock Center for Corporate Governance at Stanford University makes available case studies used in teaching corporate governance. Listings are on SSRN. Typical issues covered include: Say on Pay, activist investing, Netflix and their compensation packages that allow employees to determine their own mix of cash and equity-based awards, 10b5-1 plans providing a safe haven from insider trading laws, comparison of executive compensation at grocers, and Gretchen Morgenson advocacy of shareholder democracy.
Mark Latham represents individual investors on the SEC Investor Advisory Committee (SECIAC). He reports in his VoterMedia Finance Blog on a creative Voter-Funded Investor Education Proposal. It was considered by the Investor Education subcommittee. Unfortunately, he was informed the SEC is not empowered to distribute funds to other organizations.
Hopefully, he will be able to attract the attention of FINRA, the Department of Treasury, Congress, or some other entity for funding.
Our concept for voter funded investor education is oriented toward worldwide web based education programs aimed at a broad (national or global) audience. All individual investors could vote on a web based ballot to determine the shares of funding for perhaps 15 or 20 competing education programs. The voting and funding can be conducted continuously through time, thus giving the competitors a continuous incentive to serve investors’ education needs.
The ballot web page would link to each participating education program’s website. This could be a component of a new portal at OIEA’s website investor.gov, where investors could find links to a wide range of education programs.
Ignites and FundFire are jointly hosting “Social Investing Opportunities And Challenges” a special 45-minute webinar on January 26th, 11:00 AM EDT, helping money managers, financial advisors and investment consultants address the increased interest in investments focused on environmental, social and governance (ESG) issues.
Sponsored by The Corporate Library, an independent corporate governance research firm, this event will explain:
* Which of the areas of ESG promise the most opportunity?
* How do firms identify likely investors?
* What changes to your trading infrastructure does ESG require?
* How will adding ESG impact your distribution strategies?