Tag Archives | majority vote

WD-40 Win Win – Majority Vote Standard

WD-40 win winWD-40 win win is due to a shareholder proposal filed by James McRitchie and directors who want good corporate governance practices. Earlier this week, I reported that Broadridge amended its proxy proxy access bylaws to allow groups of 50 to nominate directors. Now WD-40 has filed bylaws to implement McRitchie’s proposal requesting that uncontested directors be elected only by a majority vote. Continue Reading →

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Reed’s Inc: Proxy Score 55

Reeds IncReed’s Inc. (REED), develops, manufactures, markets and sells fantastic natural non-alcoholic carbonated soft drinks and other confectionaries, such as Reed’s Ginger Brews; Virgil’s Root Beer, Cream Sodas, Dr. Better and Real Cola, including ZERO diet sodas; Culture Club Kombucha; China Colas; Reed’s Ginger candy and ice creams, and Sonoma Sparkler and other juice based products.

Their annual meeting is coming up on November 29, 2016. Unfortunately, the company is too small for ProxyDemocracy.org to follow, so no help there. However, I have been heavily involved with the Committee to Rescue Reed’s, so am intimately familiar with many of the issues. Vote FOR proxy access, split chair/CEO, forcing zombie directors to resign, all new board nominees and pay. Vote AGAINST Christopher J. Reed,  Auditor, and Repricing options. I voted with the Board’s recommendations 55% of the time. View Proxy Statement; again, the company to small to pull up proxy via iiWisdom. Continue Reading →

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Reeds Board: Commonsense Principles

Can't Find a Photo of Reeds Board

I Can’t Find a Photo of Reeds Board ($REED)

Reeds Board (REED); is it functional? As indicated in a previous post, it might be useful to try and apply the recently announced Commonsense Principles of Corporate Governance to Reed’s Inc. and their board of directors. This will probably be something of an exercise in futility with mostly blank spots, since Reeds is a very small company, with little coverage and I don’t know much about what the Reeds Board actually does, only something about what they should be doing. I’m not a very large shareholder, so it isn’t financially worth a major effort for me to mount a challenge to the current Reeds Board or management. However, I am hoping this exercise may be helpful to others considering such a challenge or even just a simple books and records request at Reeds or elsewhere.

The business leaders who authored the Commonsense Principles hoped that, “at the very least, these principles will serve as a catalyst for thoughtful discussion.” That’s the intent here. I hope that my very quick review of the Commonsense Principles might be a catalyst for discussions between the Reeds Board and concerned shareholders. I don’t have time to go through all the Commonsense Principles, so I will just highlight a few that seem relevant to the Reeds Board. Like the authors of the Commonsense Principles, my hope is that this post and other communications will lead to thoughtful discussions between the Reeds Board and the shareholders of Reeds Inc. Continue Reading →

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Alphabet: Proxy Score 5

AlphabetAlphabet (GOOGL), one of the companies in my portfolio, is a holding company. The Company holds interests in Google Inc. (Google). The Company’s segments include Google and Other Bets. Google segment includes Internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome, Google Play, and hardware products, including Chromecast, Chromebooks and Nexus, which are sold by the Company. Their annual meeting is coming up on June 8, 2016.

ProxyDemocracy.org had collected the votes of three fund families when I checked. Vote AGAINST the Board, Stock Plans, Articles; FOR auditor and all shareholder proposals. I voted with the Board’s recommendations 5% of the time. View Proxy Statement via iiWisdom. Continue Reading →

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Reed’s – REED: Reject the Board

REED Supplement 2015mtgReed Tshirt12nd update, 12/20/2015: Unpack your bags, cancel your flight and hotel. Reeds Inc. (REED) has postponed tomorrow’s annual meeting to 12/30/2015. Although the move may be costly to shareowners and our company, it may pay dividends in the long-run if REED finally starts paying more attention to shareowners, corporate governance and their legal obligations. REED made a material error in their proxy materials and ballot. Although they filed a revised proxy, they didn’t pay to send a new ballot or link to shareowners. The supplement they issued on Friday includes a new ballot but so far that has not gone out to most shareowners.  I am hoping they will do so this week through Broadridge’s proxyvote.com platform. Continue Reading →

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Proto Labs: Proxy Score 100

proto labsProto Labs Inc (NYSE:PRLB), one of the stocks in my portfolio, is an online and technology-enabled quick-turn manufacturer of custom parts for prototyping and short-run production. Their annual meeting is coming up on 5/20/2015. ProxyDemocracy.org had the votes of one fund when I checked and voted on 5/11/2015. I voted with management 100% of the time and assigned Proto Labs a proxy score of 100.

View Proxy Statement (It would have been nice to have links to index and headings). Read Warnings below. What follows are my recommendations on how to vote the Proto Labs 2015 proxy to enhance corporate governance and long-term value. Continue Reading →

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Hain Celestial Group: Proxy Vote Score 14

Hain CelestialThe Hain Celestial Group, Inc. (NASD:HAIN), which manufactures, markets, distributes, and sells organic and natural products, is one of the stocks in my portfolio. Their annual meeting is coming up on 11/20/2014. ProxyDemocracy.org had collected the votes of two funds when I checked on 11/18/2014. Sorry for the late post. Today is the last day to vote online. I voted with management 14% of the time and assigned them a proxy score of 14.  View Proxy Statement. Read Warnings below. What follows are my recommendations on how to vote the HAIN 2014 proxy in order to enhance corporate governance and long-term value.

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United Natural Foods (UNFI) & Hain Celestial (HAIN): Win or Loss?

United Natural Foods logoHain CelestialWith John Chevedden‘s help, I recently submitted shareowner proposals to United Natural Foods Inc. (UNFI) and The Hain Celestial Group, Inc. (HAIN). Both have asked the SEC for no-action letters [UNFI (UNFI no-action 8-15-2014 pdf) and HAIN] because they plan to introduce their own proposals on the same subjects. The SEC is likely to grant both requests. Shouldn’t such actions be counted as ‘gadfly’ wins by pundits like the Deal Professor? More importantly, should the SEC grant such no-action requests? Continue Reading →

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Hain Celestial to Adopt Majority Vote Standard

HAINLast month, with the help of fellow ‘economy class investor’ John Chevedden, I submitted a proposal to Hain Celestial (HAIN) to adopt a full majority director election standard. Majority voting has become a widely prevalent practice in the S&P 500 index, with only 14% of companies failing to adopt this standard. Hain is in the S&P 600 mid-cap index where only 47% have adopted a majority vote standard. Most maintain a plurality standard. So, we were attempting to move this good governance standard downstream to mid-caps. Continue Reading →

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Medivation (MDVN): Proxy Vote – Score 91

MedivationMedivation $MDVN, a promising biopharmaceutical company developing novel therapies to treat serious diseases, is one of the stocks in my portfolio. Their next annual meeting is June 27, 2014. ProxyDemocracy.org had collected the votes of one fund when I checked and voted on 6/17/2014. I voted with the Board’s recommendations 91% of the time and assigned them a proxy score of 91. View Proxy Statement. Would it bust their budget to add a hyperlinked table of contents? Read Warnings below. What follows are my recommendations on how to vote the MDVN proxy in order to enhance corporate governance and long-term value.   Continue Reading →

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Netflix $NFLX: Proxy Vote

netflixNetflix (NFLX), is one of the stocks in my portfolio. Their annual meeting is June 9, 2014. ProxyDemocracy.org had collected the votes of three funds when I checked and voted on 6/4/2014.  I voted with management 27% of the time.  View Proxy Statement (why no linked Table of Contents?) Read Warnings below. What follows are my recommendations on how to vote the NFLX proxy in order to enhance corporate governance and long-term value.   Continue Reading →

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Google (GOOGL): How I Voted – Proxy Score 41

googleGoogle Inc, $GOOGL, is one of the stocks in my portfolio. Their annual meeting is coming up on 5/14/2014. ProxyDemocracy.org had collected the votes of three funds when I checked and voted on 5/8/2014. As I post this, I see they now have voting for five funds. I voted with management 41% of the time.  View Proxy Statement.

Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime). Continue Reading →

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Video Friday: When Shareholders Vote Go & Board Says No + Top 20 Films about Finance

Recommended viewing this week is a discussion between TK Kerstetter, Chairman, NYSE Governance Services / Corporate Board Member and Scott Cutler, EVP, NYSE Euronext. Learn when directors most frequently get withhold votes. Shareholder communication is critical. To watch this one, you will need to go directly to This Week in the Boardroom.

In our second of this “double feature”  identifies the top 20 films on the basis of both their entertainment value and their educational value. Continue Reading →

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Netflix: More Reasons for Proxy Access

Netflix, Inc. ($NFLX) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/7/2013. I reported how I voted and why I am proposing proxy access in Netflix Needs Proxy Access – Proxy Score 10 Out of 100.

I’ll just add that so far this year, insiders of NFLX have sold approximately 635M in shares and have purchased zero shares. The stock price has risen dramatically since my wife filed har proxy access resolution last year. Hopefully, that won’t deter shareowners from voting for better corporate governance, which should help protect shareowners now and in the future. Below, I reproduce the full analysis by John Laide of proposals to be voted on at the NFLX annual Continue Reading →

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Netflix Needs Proxy Access – Proxy Score 10 Out of 100

Netflix, Inc. ($NFLX) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/7/2013. ProxyDemocracy.org had collected the votes of one fund when I checked on 5/25/2013. I voted with management only 10% of the time.  View Proxy Statement. NFLX is another supposedly high-tech company with no hyperlinks in their proxy statement. In fact, they don’t even include an index. They either don’t want investors to be able find information or they just don’t care enough to bother. While the stock has risen recently, the company remains risky because of poor corporate governance. Continue Reading →

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Apple Improves Governance

The preliminary vote gave my “say on directors pay” less than 4%, so I guess putting that proposal up at the world’s largest most profitable company with so many happy shareowners may have been a mistake. However, I note that Apple cut the pay of a couple of directors from $1.2 million to about half that, so maybe my Continue Reading →

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Shareowners Too Busy But Hamermesh Offers Wrong Solutions

Lawrence A. Hamermesh, Widener University School of Law, Wilmington, Delaware gave the Keynote Speech to the Practical Law Institute’s Ninth Annual Directors’ Institute on Corporate Governance on September 7, 2011. In Too Busy to Think, Spread Too Thin to Matter: Making a Rational Stockholder Voting System an Agenda Item for Management/Investor Dialogue, he runs over some interesting territory and concludes we need to limit the number of shareowner meetings and votes to make them more meaningful.

Prof. Lawrence A. Hamermesh

One option is to “require a stockholder vote on the election of directors once every three years, unless owners of more than, say, 3% of the voting power demand a meeting in the meantime.” Another would be to “dispense with annual meetings” but substitute “some enhanced stockholder right to ballot access and to convene stockholder meetings.”

I agree there are problems but these “solutions,” especially the first, could lead to even less accountability than we have now. Hamermesh reminds his audience of Chancellor William T. Allen’s 1988 opinion in Continue Reading →

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Kellogg: How I voted

Kellogg is one of the stocks in my portfolio. Their annual meeting is coming up April 29. I’m a little disappointed not to see more voting advice available at this late date (only 1 fund reporting on ProxyDemocracy.org).

The “Reduce Supermajority Vote Requirements” proposal is mine, so of course I was sure to vote for that one.

AFSCME has done more to advance the cause of proxy access than any other group in the last decade. Since they appear to put a reasonable amount of effort into researching proxy issues and Continue Reading →

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Apple Invesotrs Win on Majority Vote

Apple tasted defeat at its annual meeting yesterday when CalPERSs, the California pension fund, saw its resolution in favor of majority voting for directors passed by shareholders. (Apple Loses Investor Vote, 2/24/2011)

At Apple’s annual meeting on Wednesday, about 74 percent of votes cast favored a proposal by Calpers that unopposed candidates for the company’s board receive a majority of votes to win election, according to the fund. (Apple succession call nixed, board rule OK’d | Reuters, 2/23/2011)

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Senate Banking Gets Message From Investors

Members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs were sent a AFRtoSenateLetterJan20-2010 from signatories representing a broad coalition of investors and market participants (including the publisher of CorpGov.net) urging them to require proxy access and majority votes for director elections.

We believe Congress should adopt director election reforms in two ways: (i) shareholders should have the ability to nominate directors through inclusion of their nominees in the company ballot and proxy materials and (ii) directors should not be elected unless they receive majority support from shareholders who cast their votes.  These are fundamental rights that should be available to shareholders in the US.

Signatories included academics, religious groups, CSR/SRI funds, investment advisors, consumer protection, unions, foundations, and the Council of Institutional Investors (CII). Several who signed are also members of the SEC’s relatively new Investor Advisory Committee, in fact, fully half the members of that Committee signed.

In a separate letter to the SEC, dated January 14th, CII stated:

When the fog of various myths about proxy access and “private ordering” is dispelled, it becomes clear that only a uniform, federal proxy access rule can truly remedy the deeply flawed director election process and empower investors to hold boards accountable. As the SEC reviews this second round of public comments, we urge the Commission to reject the following myths about its proposed proxy access rule.

Their letter goes on to address the myths that changes to state law makes a federal proxy access rule unnecessary, that proxy access will subsidize investors leading to excessive nominations or election of “special interest” directors and that shareowner opt-out is an “investor choice” approach to proxy access. Each myth is dispelled with excellent arguments. I urge readers to read the letter directly, posted here: CII1-14-10ProxyAccessCommentLetter.

See also their November 18, 209 letter to U.S. Senate Committee on Banking, Housing, and Urban Affairs:

Majority Voting for Directors. At most U.S. public companies, directors are elected by a plurality of votes cast, rather than by a majority. Since nearly all director elections are uncontested, plurality voting results in “rubber stamp” elections and directors who are accordingly less accountable to shareowners. As mandated by the discussion draft, majority voting in uncontested elections ensures that shareowners’ votes count and makes directors more accountable to the company’s owners.

In an email to me yesterday, Anne Simpson, Senior Portfolio Manager for Corporate Governance at CalPERS, noted:

We think it is vital that proxy access get passed without an opt out provision, which is being floated as a compromise… a dangerous precedent. Imagine if companies could opt out of producing financial statements? Or pay disclosure? If directors cannot be removed, and they cannot be replaced, then we have a rotten core… system.

She goes on to emphasize the importance of the SEC being “kept on track.”   More comments from the people whose savings are at stake “would surely be good.” She then includes a copy of their letter of January 19th offering comments on the reports and data sources cited in the SEC’s latest consultation concerning proxy access.

Again, like the CII letter addressing myths, this is one that should be read by everyone concerned with proxy access, since it addresses arguments put forth by the Business Roundtable. Obviously, many of their CEO members would rather continue hand-picking their boards.

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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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