Tag Archives | ICCR

Investor Response to Chamber: Don’t Gut Rights

Investor Response to Chamber: Letter

Representatives of hundreds of investors with trillions of dollars in assets delivered a letter to the SEC on November 9, 2017, An Investor response to U.S. Chamber’s Proposal to Revise SEC Rule 14a-8 (report).

We noted with interest the November 1, 2017, guidance contained in Staff Legal Bulletin No. 14I. While we are reserving judgment about how the guidance may apply in practice, we are particularly pleased by Director Hinman’s accompanying statement that the guidance is not intended to “make things easier or harder for one side or the other, . . . [but] to improve the process.” We strongly support that goal and plan to actively monitor the SEC staff no-action process during the upcoming proxy season to determine whether the goal was achieved.

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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 →

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Wells Fargo Receives ICCR Resolutions

Wells Fargo

Wells Fargo Receives ICCR Resolutions

Shareholders of Wells Fargo $WFC and members of the Interfaith Center on Corporate Responsibility today announced that they have filed multiple resolutions as a result of fraudulent activities uncovered by the Consumer Financial Protection Bureau (CFPB).

Wells Fargo recently reported a $185 million settlement with the CFPB due to widespread and systemic illegal acts of consumer fraud, including setting up two million deposit and credit card accounts for customers without their permission. Continue Reading →

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Tim Smith Honored by ICCR

Tim Smith (a few years back)

Tim Smith (a few years back)

On September 29, 2016 Tim Smith, Walden Asset Management’s director of ESG Shareowner Engagement, will be honored at the annual event of the Interfaith Center for Corporate Responsibility (ICCR) for his decades-long, indefatigable leadership shaping the landscape of shareholder advocacy for more just and environmentally sound business policies and practices.

Tim is the first secular recipient of the ICCR Legacy Award, a recognition of his nearly quarter-century history at the helm of ICCR as well as 16 years at Walden where he continues to demonstrate daily how shareholder leverage can be an effective vehicle for positive change.

ICCR describes Tim as having had a profound impact on the field of sustainable and responsible investing, noting:

Tim plays a valuable role in virtually every ICCR program area but has been an especially effective leader of investor engagements on climate change and on governance topics including lobbying and political spending, executive compensation and separate Chair/CEO, as well as board diversity.

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Lobbying Disclosure Sought by Investors

lobbying disclosureLobbying disclosure is sought by shareholder resolutions filed at 50 companies by 66 institutional and individual investors.

Corporate lobbying disclosure remains a top shareholder proposal topic for 2016. At least 66 investors have filed proposals at 50 companies asking for lobbying reports that include federal and state lobbying payments, payments to trade associations used for lobbying, and payments to any tax-exempt organization that writes and endorses model legislation. Political activity remains a top investor topic for the sixth consecutive year, with more than 90 proposals filed for 2016 that seek disclosure of either lobbying or political contributions. Continue Reading →

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Interfaith Center on Corporate Responsibility Welcomes New CEO, Josh Zinner

ICCR

Josh Zinner

Josh Zinner

ICCR’s Board of Directors announced that Josh Zinner will be assuming the role of ICCR’s new Chief Executive Officer, effective January 4th2016.

Josh Zinner comes to ICCR with 20 years’ experience as a non-profit leader, coalition-builder and policy advocate. For the past eight years Josh has co-directed the New Economy Project, an organization that works with community groups to promote economic justice – through policy advocacy, litigation, coalition building, shareholder action, community education, and research – and has been at the forefront both locally and nationally in the fight against discriminatory financial practices. Continue Reading →

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Video Friday: ICCR 2015 Event – On Leadership

ICCRLeadership transitions are the ideal time to think about what it means to lead.  What is the role of leadership in building the “just and sustainable corporate world” the ICCR community envisions in its mission statement? During an interactive panel on Oct. 1, 2015, five dynamic leaders explored the role of corporate responsibility and the capital markets through the lens of their own experiences as leaders in today’s marketplace. Continue Reading →

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Supply Chain Transparency on Trafficking & Slavery Act

ICCRThe Interfaith Center on Corporate Responsibility (ICCR), a coalition of 300 investors with assets under management of over $100 billion, Calvert Investments and Christian Brothers Investment Services, commend Congresswoman Carolyn Maloney (D-NY) and Congressman Chris Smith (R-NJ) for her introduction of The Business Supply Chain Transparency on Trafficking & Slavery Act of 2015 in the House of Representatives.

The bill was introduced following publication of the State Department’s 2015 Trafficking in Persons report, which called on governments to “set clear expectations for businesses on human rights issues and adopt policies that promote greater transparency and better reporting on anti-trafficking efforts in supply chains.” Continue Reading →

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Sustainable, Responsible, Impact Investing: Part 2

Sustainable, Responsible, Impact InvestingThis is the second in a multi-part series on the 25th annual SRI Conference on Sustainable, Responsible, Impact Investing held November 9–11, 2014 at The Broadmoor in Colorado Springs.

See also Video Friday: What is Sustainable, Responsible, Impact Investing?Violating Indigenous Peoples’ Rights Increases Industry Risks, Surveys: Nonprofit Board Members & SRI 2014 Conference AttendeesSustainable, Responsible, Impact Investing: Part 1. The Agenda page of the Conference site now has links to video, audio and presentation slides.  Continue Reading →

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Directors Forum 2014: Morning Sessions

Kroc-School-of-Peace-and-Justice-University-of-San-DiegoBelow are some notes I took during the morning sessions at the Corporate Directors Forum 2014, held on the beautiful campus of the University of San Diego, January 26-28, 2014. This year, I was only able to attend on January 27th. 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. Continue Reading →

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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 →

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Reeds, Inc. (REED): My 1st Attempt to Collaborate Through Sharegate

sharegateReedsI’ve started to use Sharegate.com to network with other shareowners around specific companies. The first company I’m working on through Sharegate is Reeds (REED). I think our company’s product line is strong but management and the board appear to be weak in distribution skills. After years of refining and growing their fine products, #REED still is not profitable.

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Political $ Disclosures Turn Corner: Alliant Techsystems & CF Industries Holdings

CitizensUnitedAt Alliant’s annual meeting on July 31st 65% of shares were voted in favor of the ICCR-sponsored proposal on increased transparency on company’s state and federal lobbying activities. That’s an exceptionally high vote for a shareholder-sponsored proposal, today investorsin Alliant Techsystems (ATK) an aerospace and defense contractor and gun manufacturer, voted in favor of a shareholder request for greater transparency on the company’s lobbying activities. 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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Garment Worker to Access WalMart Annual Meeting

I am delighted to announce that Kalpona Akter, a former garment worker from Bangladesh who is the executive director of the Bangladesh Center for Worker Solidarity, will have access to the floor of the WalMart ($WMT) annual meeting on Friday, June 7 in Bentonville, Arkansas. She has been an outspoken critic of sweatshop conditions in Bangladesh where Wal-Mart is the second largest producer. Ironically, she will be presenting my proposal to allow shareowners to call a “special meeting.” Continue Reading →

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Environmental and Social Shareowner Proposals Gain Traction

Key Characteristics of Prominent Shareholder-sponsored Proposals on Environmental and Social Topics, 2005-2011, released by the IRRC Institute (IRRCi) and researched by Ernst & Young LLP finds environmental and social (E+S) shareowner proposals are gaining increased support from investors at US companies. Download the report, presentation, press release and even replay the webinar from IRRCi’s website. Continue Reading →

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ICCR Offers Guide and Tweets #ProxyVoteForPlanet

Members of the Interfaith Center on Corporate Responsibility (ICCR) released their 2013 Proxy Resolutions and Voting Guide including all member-sponsored shareholder proposals for the upcoming proxy season.

ICCR members are calling on asset owners to help promote corporate responsibility by voting their proxies in support of investor proposals that advance social, economic and environmental justice.   Continue Reading →

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Fracking Done Right: Guide from IEHN and ICCR

The Investor Environmental Health Network (IEHN) and the Interfaith Center on Corporate Responsibility (ICCR), two shareholder coalitions committed to social and environmental justice, released a guide intended to help increase disclosure and mitigate the impacts of natural gas operations using hydraulic fracturing (commonly referred to as “fracking”).

Responding to growing public concern about the environmental and social Continue Reading →

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2010 Proxy Season

Robert Kropp, writing for SocialFunds.com, ran a recent series of three posts interviewing people on the passing proxy season.

First up was Environmental Shareowner Resolutions Gain Record Levels of Support in 2010 Proxy Season, in which Kropp interviewed Michael Passoff of As You Sow.  Looking back on shareowner vote totals for first-time environmental resolutions over the past decade, five of the top ten were for resolutions filed this year. One reason, according to Passoff, was that “Shareholder activists are getting better at making financial arguments about risks from environmental and social liabilities.” In addition to strong showings for resolutions on coal ash and hydraulic fracturing, which got considerable press, a first-time vote on Bisphenol A (BPA) at Coca-Cola won 21.9% of shareowner votes, and resolutions addressing oil sands development in Canada won substantial vote totals as well.

Kropp interviewed Laura Berry of the Interfaith Center on Corporate Responsibility (ICCR) whose members filed a total of 308 shareowner resolutions this year, addressing issues across the ESG spectrum. After years of attempting to convince financial companies to disclose the manner in which they collateralized derivatives, only to have the resolutions disallowed by the SEC, ICCR members were finallysuccessful in having the resolutions included on proxy ballots. Resolution filed at Goldman Sachs, Bank of America, Citigroup, and JP Morgan Chase requested that the companies “ensure that the collateral is maintained in segregated accounts and is not rehypothecated. (taking in collateral as guarantees on derivatives trades, and then using it as collateral for their own transactions)

Members are also “connecting the dots” on health care, asking, “do companies go on record saying they support universal health care, and then underwrite the US Chamber’s efforts to derail it?” Some retail shareowners are beginning to see some value in voting but “I don’t think the average retail investor really understands how to be a citizen investor yet.” “Institutional investors are beginning to understand the connection between lack of transparency and investment risk.” “Those of us who think about social and human capital have been working on these issues for such a long time,” Berry said. “Now, we owe it to the issues to move beyond our circle and make our case to mainstream investors.” (Higher Shareowner Votes Are Encouraging, But Not Enough to Change the System)

Kropp finished up by interviewing me for a post entitled, Will 2011 Be a Watershed Year for Corporate Governance? Speaking to a largely CSR audience I stressed the fundamental importance of corporate governance to any chance of winning on social and environmental issues. Pay attention to the rules of the game. In that regard, the most important development was Apache v. Chevedden where Apache won the battle but lost the war and the Dodd-Frank bill.

I was on a call with the Social Investment Forum yesterday where a panel was also discussing the 2010 proxy season. Conrad MacKerron and the folks at As You Sow put together a great recap. Two measures were passed with record high votes on sustainability/GHG emissions (60% at Layne Christensen) and climate change (53% at Massey Energy).  In 2000, no majority votes on CSR resolutions… none even above 40% and only 6 above 20% out of 266 resolutions (average vote of 7%). This year, 2 majority votes, 17 above 40%, 88 above 20% out of 361 (average 19% vote). MacKerron attributes to:

  • Activists making better financial arguments
  • Increased environmental awareness
    • Recognizing true vs. externalized costs
    • Calculating environmental and reputations risk
  • More mutual fund and pension fund support
  • SEC Staff Legal Bulletin in October 2009 made it harder for companies to omit resolutions on environmental or health risk assessment

On the call, Sanford Lewis mentioned that SEC staff would likely issue another legal bulletin in the fall. Comments to Meredith Cross, Director, Division of Corp. Finance, might be helpful. For next year, he sees more focus on risk evaluation, enterprise risk management and better coordination between funds to avoid duplication. Paul Hodgson sees even bigger wins for shareowners, with proxy access, expanded say on pay, continuing work on majority voting… an “era of shareholder activism.”

For much more, see post by Lejla Hadzic and Eric Shostal, More Shareholders Call for Political, Climate Risk Disclosure: A Post-Season Review of 2010 Environmental and Social Proxy Proposals, RiskMetrics Group, 7/15/2010. See also Should shareholder proposals serve as an early warning system for emerging risks and retail challenges? by Sanford Lewis and SIF proxy season recap call by Paul Hodgson.

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Risk Lessons from BP

According to an article in Pensions & Investments, the BP disaster will cause managers and investors to become more aware of how ESG-related risks can be material to a company’s performance, experts say. This will drive managers and investors to pay closer attention to ESG risks and to push for changes in areas such as corporate disclosure that might help investors better understand ESG risks.

At the heart of the problem is that stock analysis never assumes anything will go wrong, said Ran Fuchs, global head of ESG analytics at RiskMetrics Group: “It is something missing from analysis — not just ESG analysis. In the past few years, a lot of bad things have gone wrong, and we still ignore it in our analysis.”

Most of the best-in-class products labeled ESG had BP in the portfolio (before the disaster), yet there seems to have been plenty of warning signals in hindsight. According to ABC News:

  • In 2007, a BP pipeline spilled 200,000 gallons of crude into the Alaskan wilderness and BP got fined $16 million.
  • Then the Justice Department required the company to pay approximately $353 million as part of an agreement to defer prosecution on charges that the company conspired to manipulate the propane gas market.
  • In two separate disasters prior to Deepwater Horizon, 30 BP workers were killed and more than 200 have been seriously injured.
  • According to the Center for Public Integrity, in the last three years, BP refineries in Ohio and Texas have accounted for 97 percent of the “egregious, willful” violations handed out by OSHA.
  • OSHA statistics show BP ran up 760 “egregious, willful” safety violations, while Sunoco and Conoco-Phillips each had eight, Citgo had two and Exxon had one comparable citation. (BP’s Horrible Safety Record: It’s Got 760 OSHA Fines, Exxon Has Just 1, Business Insider, 6/2/10)

The P&I article says we’ve learned four key things from the BP spill:

  • the importance of inherent sector risks;
  • the potential of politics affecting how a company manages a disaster;
  • media response will be much swifter and more international than ever before; and
  • companies must take responsibility for their suppliers and contractors publicly from the start of the disaster. (Managers learn from the BP catastrophe, 6/28/10)(

As early as 1993, ICCR members filed six resolutions to more closely regulate subprime mortgages. (Two Overlooked Lessons From the Financial Crisis, 12/31/10) We need to pay more attention to signals of excessive risk.

Maybe it’s time for index funds to weight stocks based on risk. David R. Koenig, recently launched The Governance Fund, LLC, a private investment management firm that uses a proprietary model of corporate governance based on several data-sets to capitalize on what he terms “the value gap” between well-governed and poorly governed companies. Hopefully, we’ll see more attention to strategies that eventually may reduce overall risks to our environment. Kenneth Rogoff even speculates the BP spill may rekindle interest in a carbon tax? (Can Good Emerge From the BP Oil Spill?, Project Syndicate, 7/2/10)

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Mercer's Responsible Investment Update

Mercer’s Responsible Investment Newsletter (June 15, 2010) outlines preliminary results of integrating ESG analysis into global equity portfolios.

Our analysis of the beta of ESG integration has so far been quite positive – ESG factors are material and integrating these factors into investment decision-making can reduce investment risk without sacrificing return…

Initial analysis on adding alpha to a global equity portfolio through a tilt towards sustainable themes, indicates the following:

  • A portfolio with a tilt towards sustainable themes has a higher risk/reward ratio versus a broad market index, but has mixed results when versus a comparable themed index.
  • In the sustainable themed space, the risk of bubbles and strategies’ short track records make manager selection key.
  • The themes of renewable energy and water so far show strong return potential versus the broader market.

The Newsletter also addressed the fatalism of many investors, including large funds, who doubt their proxy vote can make a difference, providing several examples to refute that assertion. Even if you are not ready to take the plunge into “active” ownership, Mercer argues an interim step, “informed” ownership. “This could be defined simply as being satisfied, through due diligence, that votes are being cast in the best long-term interests of the end client or owner.”

Of course, Mercer offers due diligence on investment managers, including evaluation of resources and processes dedicated to proxy voting and ESG issues. They also cite membership organizations, such as the Council of Institutional Investors, the Interfaith Center on Corporate Responsibility and the UN’s Principles for Responsible Investment.

Around the world, institutional investors work hard to achieve the best long-term returns for their clients, participants or beneficiaries. We believe that voting and constructive engagement with companies and peer organizations can help mitigate company specific risks for which investors may not be compensated. There is also reason to believe that more shareholder participation over time can raise the bar for corporate governance in the broader market and improve beta. If your organization agrees with these arguments, then voting and engagement may be a low cost way to help achieve these results.

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Reign of the Shareholder is Over?

I just returned from ICGN 2010 (and will post on that next week). Among the thousands of e-mails I received during my week of absence, one stands out (although I haven’t gone through them all). Brendan Sheehan, the usually thoughtful Executive Editor of the Corporate Secretary, posits the “Reign of the Shareholder is Over” because 36 members of Congress wrote to BP protesting the company’s announced intention to pay a dividend.

Sheehan argues “that members of Congress are showing their true colors: they care about whatever the hottest topic of the day is. After two years of fighting for the rights of shareholders everywhere, they have turned on them almost overnight.” “So it now appears that the message from Congress is ‘Shareholder be damned.’”

First, when did a “reign” of shareowners begin? If there ever was such a phenomenon during my lifetime, I missed it. True, we are finally to the point where at about 2/3 of S&P 500 shareowners can vote against directors and if those incumbents don’t get a majority of the vote, when running unopposed, they are supposed to turn in a letter of resignation, which boards so far have more frequently refused than accepted. The vast majority of companies still operate under a plurality vote system, much like the old Soviet Union… vote for the party but if you don’t they are in anyway. Congress and the SEC are still moving forward on proxy access, so it isn’t as if Congress has all of a sudden turned against trying to rebalance, in a small way, the huge advantage given CEOs over shareowners.

Of course Congress cares about the hottest topics of the day. They are elected to represent the public. Too often, they are more concerned with taking money and advice from lobbyists. On issues as huge as the Gulf spill, they can’t duck out completely. Congress needs to at least attempt to get BP to hold on to cash needed to pay for cleanining up the oil spill and damages, although it is hard to imagine that any amount of money will undue all the damages to people and to nature.

BP also faces political pressure on their home-front, since dividends funded a good portion of British pensions. Apparently, BP may hold off on paying the dividend, placing the money in an escrow account “until the full scale of the company’s liabilities” from the spill are clear. (BP plans to defer dividend after pressure from Obama, Times of London, 6/1/10)

After purporting to show that Congress has turned against shareowners, Sheehan goes on to argue that giving more power to shareowners is a mistake because in speaking before the Financial Crisis Inquiry Commission, Warren Buffett, the largest shareowner at Moody’s, defended their lack of foresight regarding the risk of subprime loans. Since Buffett made the same mistakes and assumptions as the rest of management, “it is a slap in the face to all those who argue that greater shareholder representation on boards would have mitigated some of the problems.”

Sheehan mistakenly lumps all shareowners into a single class. Buffett is widely known for the passivity of his management style, once a company has entered the Berkshire Hathaway fold. Members of the Interfaith Center on Corporate Responsibility (ICCR) aren’t nearly as passive as Buffett. As early as 1993, ICCR members filed six resolutions to more closely regulate subprime mortgages. According to ICCR Executive Director Laura Berry:

When our institutional investor members view their holdings through the lens of justice and sustainability, the priorities for action that emerge frequently anticipate market moves. Time and time again, the prophetic voice of faith has allowed our members to anticipate emerging areas of corporate responsibility, in investment policy as well as in social, economic and environmental policy. For more than a decade before anyone else, our visionary members have been expressing concerns related to predatory lending practices, inappropriate underwriting standards and the potential consequences of securitization of debt instruments.

Of course, it would be nice if proxy access empowered long-term responsible shareonwers like the members of the ICCR. Unfortunately, even a best case scenario is likely to leave ICCR members mostly out of the loop because of the high thresholds that will be required to nominate a small portion of board members.

The government has a role to play in regulating companies and in ensuring corporations are operated more democratically. Certainly, they capture of regulators by businesses doesn’t help avert disasters such as the Gulf spill. Even before Citizen United, active shareowners like ICCR sought to limit the political influence of not just the companies whose stock they own, but all companies. Now, that task is even more urgent.

The reign of shareowners has yet to begin. If it ever does come about, let’s hope activists like ICCR are empowered, rather than pacifists like Buffett. Buffett may make lots of money, but don’t count on shareowners like him to foresee or forestall housing bubbles, oil spills or global climate change. Of course, according to organizations like the Business Roundtable, governance reforms, like even a mild for of proxy access, will only empower “special interests” that will “hurt the U.S. economy.”

It may take a little hurt in the short-run to address long-term problems. I hope Brendan Sheehan and the corporate governance professionals he works for aren’t too short-sighted.

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How I Voted at Citigroup

ProxyDemocracy.org was very helpful, with several funds reporting their votes in advance. Also very helpful was CalPERS’ site, which provided reasons for their votes.  I voted for most of the directors, along with most of the funds who reported voting in advance on ProxyDemocracy. However, I joined with CalPERS in withholding my vote from the following two, since I found CalPERS’ reasons compelling:

Director Andrew N. Liveris – I joined with CalPERS in voting against Liveris, since he served as members of the audit and risk committee prior to the financial crisis when there was a failure to ensure appropriate corporate governance practices pertaining to risk management were in place. Additionally, Mr. Liveris is a current CEO while serving on an excessive number of public company boards.

Director Judith Rodin –  Like Liveris, he served as members of the audit and risk committee prior to the financial crisis when there was a failure to ensure appropriate corporate governance practices pertaining to risk management were in place.

Along with most of the funds, I voted to ratify the auditors, support the omnibus stock plan, and approve TARP repayment shares. I voted against the Advisory Vote to Ratify Named Executive Officers’ Compensation, since CalPERS believes the company does not adequately disclose the process by which executive compensation is determined.

Along with most of the funds, I voted to Amend NOL Rights Plan (NOL Pill). Generally, I vote against such plans, but CalPERS believes the poison pill is in shareowner best interest. Additionally, the company has indicated the adoption is not for anti-takeover purposes.

I joined with the funds to Approve Reverse Stock Split. I voted with most of the funds in favor of Affirm Political Non-Partisanship, a proposal by Evelyn Y. Davis. CalPERS voted against it. They believe the proposal is unnecessary because Citigroup indicates it adheres to all state and federal regulations on this matter. That doesn’t seem like a convincing reason to me but I’m not very firm in my support. In glancing at the proposal, it may well be that everything in the resolution is already covered by law. If so, it does no harm to vote in favor of it.

Along with most of the funds, I voted in favor of all the shareowner proposals. Report on Political Contributions, by the Firefighters’ Pension System of the City of Kansas City. CalPERS believes this proposal poses no long-term harm to the company. According to MoxyVote.com, the Center for Political Accountability also supports this proposal.

Report on Collateral in Derivatives Trading, by the Sisters of Charity of St. Elizabeth. CalPERS believes this proposal poses no long-term harm to the company. It seems to me this has the potential to reduce risk. That’s better than posing no long-term harm. In fact, if shareowners had listened to the Sisters of Charity and members of the Interfaith Center on Corporate Responsibility there is a good chance we would have missed the Great Recession. See this 2008 press release about ICCR sounding the alarm for 15 years. Why weren’t shareowners and management listening? Rev. Seamus Finn, director, Justice, Peace & Integrity of Creation, Missionary Oblates of Mary Immaculate and an ICCR board member, said:

The U.S. government controls over a quarter of outstanding Citigroup shares today.   It has an extraordinary opportunity here to send a clear message to Wall Street that more derivatives disclosure is vital.   Even more to the point, the Treasury Department really has no choice other than to support our resolution since a failure to do so would directly undercut its campaign for critical financial reform.

ICCR Executive Director Laura Berry said:

To adopt an inconsistent posture at this critical juncture on derivatives disclosure would be disastrous both in terms of how Wall Street reads the signals from Washington and how seriously Congress sees the Obama Administration as being in its support of vital financial services reform. (Shareholders: Treasury Should be Consistent on Capitol Hill and on Wall Street by Voting Citi Shares for More Derivatives Disclosure, press release, 4/16/2010)

Ability to Call Special Meetings, by William Steiner. CalPERS believes shareowners should be able to call special meetings. So do I. I’ve even submitted proposals myself on this issue and, like William Steiner, I often work with John Chevedden on these submissions.

Proposal Regarding Stock Retention, by AFL-CIO. CalPERS is a firm supporter of stock ownership guidelines that require executives to satisfy minimum levels of ownership after leaving the company. It should be noted the proposal mandates that executives hold 75% of their equity awards for two years after retirement or termination. CalPERS prefers that guideline specifics be designed and implemented through the company’s Independent Compensation Committee. I favor holding most equity awards until after retirement.

Shareholder Proposal Regarding the Reimbursement of Expenses in a Contested Election, by AFSCME. CalPERS believes this proposal poses no long-term harm to the company and would be a benefit to shareowners. I think this proposal could increase the ability of shareowners to have additional influence on nomination and election of directors.

I voted using MoxyVote.com. I you agree or disagree with my votes, you can leave comments here on CorpGov.net or on my wall at MoxyVote, search James McRitchie. If you use ProxyDemocracy, keep in mind that you can post how you’ve voted or any other advice regarding a company right on the site. For and example, see the bottom of the Citigroup page. When it becomes technologically feasible, it would be great if sites like MoxyVote and ProxyDemocracy can tell users who sponsored each resolution. Having to look that information up on the proxy takes an extra minute or so. Just as many will vote with various funds because of their “brand” reputation, we will also vote based on the brand of the sponsor.

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February 2009 Special News Supplement: Corporate Governance Roundup 2009

Yippee-i-o-ki-ay! From the conference flyer, I half expected Will Pryor, Director of the IAFF Local 10Ehnes14 and conference “go-to” guy, to show up in chaps, especially with his e-mail encouraging attendees to dress casually. Well, maybe next year. Suits and jackets prevailed in the fashion arena but there was little in the way of pretense as funds from all over California and beyond shared mostly proxy strategies. The conference was also well attended by consultants, service providers and investment advisors. Jack Ehnes (right) was the emcee and set the tone for moderators by keeping everyone on track and additing insights, without dominating the conversation.

Session One

The fist panel was composed of Bill McGrew of CalPERS, Ann Sheehan of CalSTRS (left), and John Wilson of TIAA-CREF, ASheehanmoderated by Ralph Whitworth of Relational Investors. I was a little surprised to learn that TIAA-CREF, with more than twice the assets of CalPERS, has about half as many staff working on corporate governance issues. (6 vs 11) Maybe the bigger you are, the less you need to spend to influence outcomes. Each discussed their fund’s proxy policies and initiatives. Since I live near Sacramento and am more familiar with CalPERS and CalSTRS, I paid more attention to Wilson discussing TIAA-CREF’s collaborative approach.

They don’t look at themselves as “activists” but as moderates, engaging in private dialogue, using a non-prescriptive approach but having influence behind the scenes. With holdings in about 7,000 companies, they view themselves as universal owners and all that entails, focusing more on driving changes in the market vs at individual companies. Their efforts can largely be broken into three areas: proxy voting, corporate engagement, and thought leadership. Wilson made one of the stronger arguments at the conference that divestment simply allows companies to profit from genocide in Sudan, for example, by selling shares to investors who don’t care. TIAA-CREF emphasizes reputational risk to companies in situations where they aren’t open to other arguments. (Although in the case of the Sudan, it is now mostly Asian companies that continue operating there.)

All three giant funds emphasized their relationship with CII, ICGN, global reporting initiative and other national and international organizations. All are concerned with executive pay and agreed the problem is more the rationale of the pay package, not so much the size. Pay needs to be structured in a way that it can’t be gamed. It should encourage sustainable development of the company. All support proxy access, as did just about everyone at the event.

Session Two

This was a short session with two panelists: Ann Yeger of CII (below, right) and Allen MacDougal of PIRC, HKimmoderated by Hank Kim of NCPERS (left). Is your public pension fund under attack? See Lies, Lies and More Attacks on Pension Plans, as well as other publications from NCPERS.

Yerger discussed CII’s efforts and involvement in economic reforms. For example, the Investors’ Working Group (IWG), led by William Donaldson, and Arthur Levitt Jr., both former SEC chairs. The non-partisan panel of experts is co-sponsored by CII and
the CFA Institute Centre for Financial Market Integrity. An initial report and
recommendations are expected by late spring. In April, CII expects to release a white paper commissioned by their credit rating
agencies subcommittee. I liked this phrase from a handout: “The ability to attract capital and investors, not just listings, is what makes markets competitive… investor interests should always come first.” Top concerns for CII were identified as:Yerger

  • majority voting for directors
  • proxy access
  • broker voting eliminated
  • independent board chairs
  • independent compensation consultants
  • say on pay
  • clawback provisions for unearned bonuses
  • no pay for failure – termination for poor performance

MacDougal (below left), from PIRC went on to discuss “a way out of the crisis.” He brought up the need for asset managers to be subordinate to fund trustees and the need for trustees to get involved in market reform. He also mentioned the United Kingdom Shareholders Association (known as “UKSA”), formed in 1992 to support and to represent the views of private (ie. non institutional) shareholders. UKSA provides investment education and conveys the views of investors to the boards of British companies, to the MacDougallGovernment, to the Stock Exchange, to the media and to other bodies. Wouldn’t it be grand to have something like this in the US?

He also brought up an organization that arose to help get qualified independent directors on boards. ProNed was established in 1981 by the Bank of England, following a series of banking crises in the 1970s. Yes, somewhat similar to what we now face in 2009. With proxy access likely to be granted soon, it would be great to see a clearinghouse like this in the US. Shareowner groups seem much more likely to take action if they can easily coalesce around director candidates already vetted by shareowners. There’s a ProNed in Australia. I’m not sure how involved shareowners are in it, or even how involved they were in the original.

A few of MacDougal’s other ideas involved independence of compensation and audit consultants, collective funding by investors of the effects of incentives on behavior (with regards pay), employee representatives on boards would provide another avenue of oversight (as in European countries), additional investor representation is needed in government commissions and regulatory bodies, and he favors mandatory voting disclosure for all fund managers. “We need to be radical AND practical,” he said. I say, we need to get more speakers, like MacDougal, from outside the US with a fresh perspective. I’m glad he made the long trip for the event.

Session Three

Ralph Whitworth, of Relational Investors, Denis Johnson, of Shamrock Capital, Scott Zdrazil of Amalgamated Bank and Mike Ibarra of Landon Butler presented their investment opportunities, proxy strategies and practices. Dan Pedrotty of the AFL-CIO moderated. Relational Investors and Shamrock take stakes in just a few companies. Relational focuses on:

  • business strategy (long-term value, mitigating risk),
  • capital allocation to maximize return,
  • capital structure (optimal use of debt/equity),
  • governance (transparent, responsive, accountable),
  • board composition (diverse, independent, engaged),
  • compensation (LT alignment, reinforce strategy and risk mgt.),
  • communication (timely, accurate, consistent, realistic)

During thDenis Johnsone Q&A, Whitworth said he doesn’t favor more rights for long-term investors. I haven’t heard anyone from these types of funds who does. I suppose when a fund makes a commitment of time and effort, they want to be heard right away, not ignored for the first few years.

Shamrock’s strategy was similar, although Johnson (left) placed more emphasis on removing anti-takeover provisions and providing shareowners the ability to call a special meeting. Shareowners need to accept more responsibility for removing ineffective directors. Withhold votes should have been greater in the past. Shamrock will help ensure such votes will be higher in the future. Proxy voting policies should place a greater emphasis on poor relative stock performance, he says.

Scott Zdrazil, of Amalgamated Bank, emphasized their resolutions for 2009. They’ve been using resolutions to try to “move the market” since 1992. This year they have over thirty. Zdrazil highlighted the following:

  • majority vote standard for director elections
  • annual election of all directors
  • separation of CEO and chair
  • oversight and disclosure of political contributions
  • curtailing “golden coffins”
  • clawbacks for unearned compensation
  • say on pay
  • double trigger change in control provisions – to kick in, must be change of control and termination of CEO
  • ban gross-up – let CEOs pay their own taxes
  • golden parachutes
  • healthcare reforms – adopt universal principles for national healthcare reform
  • adopt ILO labor standards

Mike Ibarra, of Landon Butler, emphasized the history of their Multi-Employer Property Trust (MEPT) funded mostly by building trade unions and pensions. He described their Responsible Property Investing as comprehensive in terms of environmental, social and governance, to preserve and enhance economic returns. The MEPT claims to have created 52 million jobs through 2006 and has played a key role in revitalization and historic preservation. They’re beating the comparable indexes, so you can do well by doing good.

Session Four

After a nice lunch, we heard from the AFL-CIO, CTW/SEIU, AFSCME and LIUNA, moderated by Carolyn Widener, of CalSTRS. Dan Pedrotty, of the AFL-CIO said they will shortly issue a rating for registered investment advisors, discussed the need to reregulate capital markets, focus more on risk management, and push for greater disclosure. He then talked about some of their new proposals:

  • golden coffins
  • hold past retirement – retain 75% of comp shares until two years after termination
  • healthcare initiative – universal, continuous, affordable, high quality

Rich Clayton then discussed the focus of Change to Win and SEIU. The focus was broader than most, with initial emphasis on the Investor and Employee Free Choice Act, which is critical to ensuring that higher productivity leads to improved paychecks. He had plenty of graphs to demonstrate our new gilded age and how the increasing disparity on income and benefits has helped fuel our problems and the financial crisis. The proportion of workers wanting to join a union has risen substantially during the last 10 years but intimidation has kept them from doing so. Clayton also touched on the 2009 resolutions being introduced by SEIU’s Capital Stewardship Program. These include:

  • say on pay
  • climate risk and greenhouse emission targets
  • labor standards / ILO compliance
  • regulatory reforms
    • proxy access
    • say on pay, and other exec compensation reforms
    • ending broker votes
    • ESG disclosure and clarification of fiduciary standards
    • reinvigorating long-term ownership discussions

Scott Adams described AFSCME’s top three governance priorities as say on pay, proxy access and vote no or withhold campaigns on directors. They will continue pushing majority vote requirements, board declassification, anti-gross ups, and in attempting provisions to recover solicitation expenses. New initiatives this year are requirements to hold equity shares for several years in escrow and to delete golden coffins. They are also working on reforms to reconstruct bond rating agencies.

Richard Metcalf then described LIUNA’s program. They seem to make more of an effort than most (TIAA-CREF in this bunch excepted) to engage companies before filing. They are using a questionnaire to determine if companies have done adequate succession planning. Turnover of CEOs has increased and there is a growing trend of looking to the outside (presumably for a savior). We’ve seen high exposure misfires, such as at Home Depot. They’re also disturbed by conflicts of interest among executive compensation consultants. LIUNA is seeking annual performance reviews by the board, development of criteria for internal candidates, planning three years in advance and annual disclosures on succession planning. He also described efforts to limit the SEC’s “ordinary business” exclusion, which has been used to exclude proposals like those submitted by LIUNA in 2006 seeking evaluation of risk at mortgage lending by home builders. Others thrown out sought to draw attention to credit rating conflicts, succession planning and evaluation of risk. He quoted former SEC Chairman Harvey Pitt, “It is impossible for the SEC to determine what the ordinary business of a corporation really is.”

Session Five

The final session saw brief presentations from Glass Lewis, Corpgov.net, ICCR, and the RiskMetrics Group. Bob McCormick of Glass Lewis led off with a comprehensive presentation that touched on the credit crisis, executive compensation, majority vote for directors, say on pay, M&A, contests, the new administration, initiatives from 2008 and those we will see in 2009. The loss of broker votes, combined with majority requirements, will make a difference in director elections. In his handout, McCormick discusses the Waxman Report on Conflicts of Interest Among Compensation Consultants, which found that almost half of the S&P 500 got executive pay advice from conflicted consultants. Another issue he raised that has been too little discussed is redomestications to lower corporate tax rates. Apparently, several are or were looking to Switzerland. For 2009, he discussed many of the same proposals already mentioned above and the likelihood of SEC and Congressional support for proxy access, eliminating broker votes, say on pay, compensation consultant conflicts, etc.

You can pull up a four-up pdf of my presentation, IncreaseVotingClout4 at and a copy of my very brief paper at corpgov.net/news/2009/GRU.doc. My hope is to generate additional interest and involvement in Proxy Democracy and the Investor Suffrage Movement. If you get inspired or have questions, please contact me. At Proxy Democracy we are primarily seeking funds willing to post their votes in advance of annual meetings; including the reason(s) for votes would be even better. ProxyDemocracy will soon beta test the ability of retail shareowners to vote directly through the site based on information posted there, including votes by trusted funds. At the Investor Suffrage Movement we are developing a network of people willing to present shareowner proposals locally, saving proponents, such as public pension funds, substantial expenses for time and travel. We are also helping shareowners write proposals, defend them against no action requests and, as mentioned, present them at annual meetings.

Laura Berry (left) then gave an impassioned presentation on the Interfaith Center on Corporate ResponsibilityLaura Berry. “Inspired by Faith. Committed to Action.” ICCR represents about 300 faith-based institutional investors with over $100 billion in invested capital. She emphasized how their prophetic voice has anticipated emerging areas of corporate responsibility. Over many years prior to the recent market collapse, they introduced 120 resolutions on subprime lending and securitization. Resolutions allow them to begin a conversation and to educate. This year, they filed 292 resolutions but engaged in 350 dialogues. They introduced some on governance issues, such as executive pay, but many more on social issues, such as: adopt human rights policy, reduce emissions, recycle, health care reform. They are making good use of data developed by Trucost to determine which companies to target on climate risk indicators. One example of their successes is that WalMart is now boycotting Uzbekistan cotton over its use of force child labor during harvest. I have bulletins from ICCR going back a dozen years and, of course, they’ve been around since the early 1970s.

The finCBowieal presentation of the day was from Carol Bowie (right) of the RiskMetrics Group. She described their elaborate process to develop policies and requested feedback on information posted on their Policy Gateway, a really great resource. She also highlighted some of the key policy updates for 2009. I’ve got resolutions in at companies to reincorporate to North Dakota because of their shareowner friendly policies, and was a bit disappointed that RMG is taking a case-by-case approach on such resolutions… better than opposing them all. RMG has come out with a strong bias in favor of pay resolutions calling on executives to hold until retirement and “bonus banking,” holding for years. It appears they are taking a much harder look at executive pay, with revised performance tests. Say on pay factors include:

  • alignment of incentive plan metrics with business goals (something which few CD&As address)
  • peer group benchmarking process
  • performance trend vs. pay trends
  • internal pay disparity
  • balance of fixed vs. performance-based pay
  • poor pay practices
  • information/rationales in CD&A regarding pay determination
  • board’s responsiveness to investor input

See also Hot Proxy Season Topics for 2009 and Explorations in Executive Compensation.

All in all, it was a great conference, close to the airport (less hassle), low key and very informative. Sorry for all the clipped head shots. Next year I’ll bring a camera. I went to a similar conference about 15 years ago in Oakland and there were only about twenty people attending, as I recall. This time there were about 150. Next year, I’m sure attendance will be in the hundreds. Three cheers to the Los Angeles Pension Trustees Network for sponsoring the event.

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