Tag Archives | Manifest

CalPERS May Boycott Dual-Class IPOs

CalPERS is considering a policy of not investing in the initial public offerings (IPOs) of dual-class companies where shareowning is structured so that a minority will control the majority of the votes. From what I have seen, CalPERS has already opposed those that exist but this step would allow the retirement system to avoid purchasing shares in such companies as they enter the market, even though they may be included in various indexes included in the fund’s portfolio. Continue Reading →

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Responsible Investor: Manifest to Enter US Market; UN Global Compact Gets Tough

UK-based proxy voting and research firm Manifest Information Services, which numbers the Swedish AP buffer funds among its clients, is planning to enter US market.

Manifest, whose US partner Proxy Governance International (PGI) withdrew from the market late last year, will begin marketing in the US shortly, said Chief Executive Sarah Wilson.

Manifest’s move comes at an interesting time, with the Securities and Exchange Commission’s new proxy access rules facing a legal challenge from the US Business Roundtable and Chamber of Commerce. (UK proxy firm Manifest planning to enter US market, Responsible Investor, 1/24/2011).

The United Nations Global Compact has expelled more than 2,000 companies for “repeated failure” to communicate their progress in integrating its sustainability principles into their operations.

The move reflects a stricter enforcement procedure against firms. The Global Compact said it has now booted out a total of 2,048 firms – the number was reached following the recent expulsion of more than 200 companies. This was at the end of a 2010 moratorium on expulsions in less developed countries. That leaves 6,066 active Global Compact participants in 132 countries. The target is for 20,000 participants by 2020.

The Global Compact is a framework for businesses that are committed to aligning their operations with 10 principles covering human rights, labor, environment and anti-corruption. (UN Global Compact expels more than 2,000 companies in enforcement drive, Responsible Investor, 1/24/2011). If you’re near Standard, you may want to attend the following discussion: The U.N. Global Compact: Principles for Businesses in Human Rights, Labor, Environment and Anti-Corruption, Sponsored by the Arthur and Toni Rock Center for Corporate Governance, Thursday, February 2nd, 2011, 12:45 PM – 2:00 PM, Room 190, Stanford Law School.

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Manifest's e-mail to Valerie Jarrett

June 17, 2010 to [email protected]

Good morning Ms Jarrett;

My name is Sarah Wilson, I am CEO of Manifest, a European proxy voting agency based in the United Kingdom. We act on behalf of a range of international investors ranging in size from small public pension funds to major European Sovereign Wealth Funds, in total a a community of investors representing assets in excess of US$3.trillion. Our clients take their responsibilities as long-term, diligent share-owners very seriously. We like they, are members of bodies such as the International Corporate Governance Network and the UN Principles for Responsible Investment. Manifest has significant experience in the proxy field, our firm has been operating since 1995, and we have actively participated in regulatory reforms in the UK and Europe with one view: to facilitate informed and responsible share ownership.

With this in mind we feel compelled to write to you and your colleagues to encourage the Obama Administration not to implement a 5% ownership threshold and a two-year holding
period for investors to nominate board directors on corporate proxies. We share the view of the ICGN that this would be extremely detrimental to the attractiveness of the US market from overseas investors. Furthermore, at a time when investors are being asked to step up to the plate and exercise diligent ownership oversight on their equity holdings, it would represent a retrograde step for US and global corporate governance.

Manifest is not as an activist with a short-term outlook, we speak as an organisation with long-standing practical experience of the mechanics of share ownership that believes that there should be a strong linkage between the economic and democratic process. With this experience, we see a number of practical problems with the proposals as currently drafted. We would therefore like to bring a number of points against these proposals to your attention for your active consideration.

1. The Ownership Threshold is Too High
Let me be clear, Manifest is no advocate of gadfly shareholders with single issue agendas to pursue. That would indeed be a reasonable basis for setting a high ownership threshold. However, the proposed threshold is being set too high to be remotely useful, particularly for larger companies, by the informed and thoughtful investing community which we work for. Ownership thresholds have been debated at length by the SEC and the arguments for the lower threshold thoroughly reviewed and understood. We therefore strongly encourage a lower ownership threshold, such as 3% for all companies, and in particular with market caps greater than $10 billion. It is also essential that shareholders should be able to work collectively as owners, it is therefore imperative that the ownership threshold can be met by multiple owners, not merely one.

2. The Ownership Period is Too Long
The right to vote is a fundamental human right which we tinker with at our peril. Would we suggest that the right to vote or be involved in democratic processes would only every be granted to individuals that have lived in a particular constituency for two years or that have an income above a certain threshold? Hopefully not. The right to vote, to representation and to holding those representatives to account is surely core to the concept of all democracies?

As the credit crisis has show us, boards that are left unaccountable can wreak havoc. Ineffective boards are not just a tax on shareholders, they are a tax on global economies. At the heart of the rift between the UK and the Thirteen Colonies was the concept of “no taxation without representation”.  If shareholders are to be taxed by agency costs then it is only reasonable for them to request representation. Without effective and accountable representation, shareholders rights are diminished and our economies pay a steep price.

3. Proof of Ownership is Tortuous to the Point of Impractical
We would also like to highlight the operational difficulties that the owners of US companies face in both proving their ownership and exercising their franchise. Two recent cases in your courts, Apache vs. Chevveden and Kurz v Holbrook, demonstrate that the property rights of investors (i.e. share ownership and voting of proxies), are heavily curtailed by a proxy plumbing process that is no longer fit for purpose in a internet-enabled investing world. Valuable time, effort and opportunity cost will be lost by market participants who will find themselves drawn in to protracted debates about who is or is not an owner/entitled to act. We encourage you to give weight to the SEC’s efforts to overcome these obstacles and bring about reforms which allow more timely and effective proxy voting and investor/issuer dialogue.

4. International Investors are Responsible Investors
Proxy access may represent a step into the unknown for many corporations. It is understandable that they would be concerned about being held hostage to special interest groups. These fears are based on fear itself and not on the real world experiences of global public markets which offer proxy access. International investors now own close to one fifth of the share capital of US listed companies, they are also active owners in other global trading markets. In the overwhelming majority of cases, shareholders are very supportive of their investee companies in which they have invested significant amounts of capital. They see significant responsibility associated with their ownership rights. Indeed in a market such as the UK, which has very permissive shareholder rights, these rights are rarely exercised in a negative way and both proxy battles and shareholder resolutions are extremely rare. Under UK company law, for example, 100 shareholders holding shares in a company with an average sum, per shareholder, of not less than GBP100 par value, can requisition a motion at the company’s annual general meeting (without any qualifying holding period). The number of such motions (resolutions) in the UK this year has been under 6, interestingly two of which were resolutions related to the environmental impact of exploration activities of two oil companies, Shell and BP.

Your Government stands at a major crossroads in financial reform and both the markets, as well as ordinary voters, will look to you to set the highest possible standards of probity in the financial industry. We urge you to grasp this opportunity to let investors play their part in ensuring the continued success of global capital markets.

Thank you for your time and consideration of our views, it is much appreciated.


Sarah Wilson, Chief Executive
FN Top 100 Most Influential Women in Finance 2009
Manifest | 9 Freebournes Court | Newland Street| Witham, Essex| CM8 2BL | England

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Abusive Practices Continue as VIFs Tilt Voting in Favor of Management

SEC Rule 14a-4(a)(3) states the proxy “shall identify clearly and impartially each separate matter intended to be acted upon, whether or not related to or conditioned on the approval of other matters, and whether proposed by the registrant or by security holders.”

Broadridge claims they don’t have to follow the rules required for proxies because they use a Voter Information Form (VIF), not a legal proxy. Broadridge can apparently reference a shareholder proposal however they want, or perhaps it would be more accurate to say however the issuer wants. The SEC doesn’t appear to be either aware or concerned that retail shareowners getting VIFs, not proxies, have no idea what they are voting for or against without referencing back to the Definitive Proxy Statement. With only about 20% of retail shareowners voting (5% under e-proxy), it is likely that many who do choose to vote do so based only on the ballot description.

John Chevedden is attempting to bring this concern once again to the SEC’s attention, using his proposal at Altera as an example. (See his CheveddenToSECreAltera4-1-2010.  For additional background on this issue, see previous post Investors Against Genocide Fighting American Funds, Broadridge and Vague SEC Requirements: More Problems Solved Using Direct Registration.)

Here’s how Broadridge/Altera represent the proposal on the VIF, which most retail shareowners get:


What the…?  That’s not a statement; it is nothing but gobbledygook. Here’s how Chevedden’s actual resolved statement reads:

Shareholders request that our board take the steps necessary so that each shareholder voting requirement in our charter and bylaws, that calls for a greater than simple majority vote, be changed to a majority of the votes cast for and against the proposal in compliance with applicable laws. This includes each 80% supermajority provision in our charter and bylaws.

Of course, this and many other issues could be corrected if we moved to direct registration of all shares. However, in the meantime the SEC should simply rule that all requirements for proxy statements, such as Rule 14a-4(a)(3), also apply to VIFs.  I urge readers to bring this abusive practice to the attention of the SEC’s Investor Advisory Committee through use of their online comment form and to Chairman Mary Schapiro.

Comment: Sarah Wilson, of Manifest, made their subscribers aware of this issue (And another good reason for a proxy system overhaul, 4/3/2010) and also noted that voting problems are worldwide. Invisible democracy hits Italian board slate (4/2/2010), discusses the case of Generali, where the vote deadline is the same day as the publication of the director lists.

The award for the worst voting deadline of the year so far… (4/2/2010), where Australian-listed Qbe Insurance Group has a 32 day deadline. This contrasts with Manifest’s 15 year practice of allowing proxies submitted electronically as close as 2 days before the vote cut-off so that more informed voting decisions could be made. If you can transfer large sums of money around the work in seconds, why can voting be executed closer to the meeting date. Manifest argues, “Voting rights are legally no different to buying and selling rights. In that regard fund managers are obliged to seek best execution on behalf of their clients.”

I understand that in both cases the local market deadlines in those markets is 48 hours… the problems may lie with Broadridge. How can you have a vote deadline in the past!? Haw Broadridge become too much of a world-wide monopoly.

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CorpGov News Bites

Goldman Sachs Group Inc., trying to show it is responsive to public pressure over its pay, said Chairman and Chief Executive Lloyd Blankfein would get a $9 million bonus for 2009, a fraction of the $68.5 million payout he got in 2007. (Goldman Bows on CEO Pay, WSJ, 2/6/10) My heart bleeds for him but I still haven’t earned a dime from my 2007 investment in Goldman, a company where management certainly dominates over shareowners. We did win big last year on my “simple majority vote,” with 75% of shares voted thanks to efforts by John Chevedden,  Claire Davis of the Edward G Hazen Foundation, and Timothy Smith of Walden Asset Management. If we can democratize Goldman, we can democratize anything.

Ceres is seeking a director of investor programs to lead in their work with institutional investors and asset managers on climate change and other sustainability issues. More information about the position and how to apply. This is a great opportunity to influence and work with more than 80 institutional investors with over $8 trillion in assets.

John Chevedden’s proposal for a majority voting standard for directors won 51% at Oshkosh (OSK) on Feb. 4th, even after OSK said it was not needed because they had already adopted majority vote requirements (in a lesser form).

Most of the companies which excel in the employee satisfaction measures used by Fortune to determine their “100 Best Companies to Work For” are privately held. Among those that are public,company founders or families have a disproportionate ownership stake. Maybe one key is that these firms feel less pressure to meet quarterly expectations and can take more of a long-term perspective. (Governance at Fortune’s 100 Best Companies to Work For, The Corporate Library Blog, 2/5/10)

Download a free Environmental, Social and Governance (ESG) Research Starter Kit for Investment Risk Management from The Corporate Library. The Financial Crisis is moving such assessments from the vanguard few to a part of normal fiduciary duty. Don’t get left behind.

SEC gets governance reforms as part of BofA settlement. As Broc Romanek notes, “governance by gunpoint” settlements have typically been driven by judges over the past decade, where institutional investor are plaintiffs. Will this be a new trend for the SEC? (The SEC Enforcement Division’s Use of Governance Reforms: Something New?, theCorporateCounsel.net, 2/5/10)

From the member area of theCorporateCounsel.net, “Can you get attorney’s fees for causing a company to add disclosures to its proxy materials? In this case – Pipefitters Local DB v. Oakley – the California Court of Appeal said ‘no.'” However, plaintiff’s counsel (Coughlin Stoia et al.) appears to have done a sloppy job. “The amended complaint copied identically worded paragraphs from previous complaints and even included the name of one of the defendants in the those other suits.” More importantly, the implication is that you might get attorney’s fees, if done right. (Suing for Attorney Fees: Causing Company to Add Proxy Disclosure, 2/4/10)

Investment Officer II opening at CalSTRS. One of the benefits; parking is only $28/mo. Great place to work.

As the debate about the rights of shareholders to appoint their own nominees to US boards continues, the PROXY Governance (PGI) Hybrid Boards study, sponsored by the IRRC Institute, is appearing with increasing frequency in shareholder comment letters and other governance analyses regarding the SEC’s proposed proxy access rules. The study found that total shareholder returns at ongoing companies with hybrid boards were 19.1% – 16.6 percentage points better than peers. (Proxy access – hybrid boards perform for shareholders, Manifest, 2/5/10)

The Altman Group’s 2/5/10 newsletter contains informative interviews with Charles Elson, which includes a discussion of the adoption of a reimbursement bylaw, and
a guest commentary from Robert Lamm, which provides a roundup of information for the 2010 and recommended action by boards.

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