Tag Archives | PIRC

Disney Proxy Vote Recommendations

The Walt Disney Company (DIS), operates as an entertainment company worldwide. Most shareholders don’t vote because reading through 74 pages of the proxy AND many more pages of appendices is not worth the time for the small difference your vote will make. Below, I tell you how I am voting and why. If you have read these posts related to my portfolio for the last 22 years and trust my judgment (or you don’t want to take the time to read it), go immediately to see how I voted my ballot. Voting will take you only a minute or two and every vote counts.

The annual meeting is coming up on March 8, 2018. I voted with the Board’s recommendations 47% of the time. View Proxy Statement via SEC’s EDGAR system (look for DEF 14A). Continue Reading →

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Walt Disney Company: Proxy Score 25

Walt Disney Company

Walt Disney Company: before you vote your proxy

The Walt Disney Company (NYSE:DIS), together with its subsidiaries, operates as an entertainment company worldwide.

The Walt Disney Company is one of the stocks in my portfolio. ProxyDemocracy.org had collected the votes of three fund families when I checked and voted. Their annual meeting is coming up on March 8, 2017.

I voted FOR Proxy Access Amendments. See how and why I voted other items below. I voted with the Board’s recommendations only 25% of the time. View Proxy Statement via iiWisdom. Continue Reading →

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Anti-Hypocrisy Proposals: Franklin Resources

Anti-Hypocrisy Proposals at Franklin Resources

Support Anti-Hypocrisy Proposals at Franklin Resources

Anti-hypocrisy proposals could be the most important ones of the season. I purchased shares on Franklin Resources (BEN) so that I could file anti-hypocrisy proposals, of the same variety we get to vote on at the February 15, 2017, annual meeting. I had not owned my shares for a year as of the filing deadline last year, so did not submit a proposal. Fortunately, other shareholders have submitted exactly the type of anti-hypocrisy proposals I would have put forward. I will concentrate on the first anti-hypocrisy proposals and will cover the other items only briefly.

Votes at funds, like Franklin Resources, are especially important since the votes these funds cast at annual meetings drive the outcomes. We can’t expect to win important issues like Majority vote provisions to elect directors, requested reports on climate change activities or voting down outrageous pay packages until huge funds like Franklin Resources vote with us. Large commercial funds, such as Franklin Resources, often have a built-in conflict of interest. They want to service corporate clients, so do not want to offend corporate managers. At the same time, as investors in their funds, we want them to monitor management and be critical when that is in our best interest. These resolutions seek better alignment between the interest of investors in funds offered by Franklin Resources and the proxy positions taken by those funds. Continue Reading →

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Shareholder Rights Get Snipped in Australia: Government Restricts Rarely Used Rule – just in case

Flag of AustraliaThe Australian Government is set to repeal an existing provision in the Corporations Act that allows 100 shareholders the flexibility to require a company to convene an extraordinary general meeting (EGM) to consider a resolution outside of the annual meeting process.

Business lobbyists including the Business Council of Australia (BCA) and the Australia Institute of Company Directors (AICD) support the move. Continue Reading →

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Investors Back Global Tax Reform and Transparency

g20Australia

Global Tax Reform and Transparency Urged

LAPFFIn a global first, a group of institutional asset owners and managers are jointly calling for comprehensive transparency and disclosure to be adopted as core principles in reform of the international taxation system to be put before the G20 Leaders Summit in Brisbane this weekend.

The group including the £150B UK Local Authority Pension Fund Forum (LAPFF), Quebec fund Batirente, Royal London Asset Management (RLAM), Paris based OFI Asset Management & Triodos Investment Management from the Netherlands have issued a  statement supporting the initial stage of the OECD BEPS Action Plan and urging a general improvement in corporate governance, transparency and disclosure  standards around taxation issues.  Continue Reading →

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August: 5, 10 & 15 Years Ago in Corporate Governance

Mr. Peabodys WayBackMachineCorporate Governance Publisher’s Note: Yes, you’ll find many broken links in the material referenced below. After 5, 10 and 15 years, the internet moves on. Many of the organization’s linked have since gone under. We’re just glad to still be here, offering our readers a sense of the history we have shared. More about the WABAC machine

Five Years Ago in Corporate Governance

CalPERS is believed by many, and for good reason, to be a paragon of virtue with regard to its advocacy of good corporate governance. Yet, their own election process had long been criticized as making it nearly impossible to unseat incumbents. At one point, the Board voted in favor of regulations prohibiting criticism of the Board in candidate statements, which were to be strictly limited to biographical information. To help remedy that problem I shelled out $500 to rent a hall, holding the first ever forum of CalPERS candidates. An expected winner who failed to show lost. Members finally had an opportunity to question candidates on their qualifications and their positions on the issues. These days, CalPERS is holding the forums in their auditorium. The next one is scheduled for September 16. See page 3 of Candidate Statement Booklet. For some of the latest issues, see CalPensions. Continue Reading →

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Rise of Pseudo-Rights: Proxy Season Review

Paul Marsland photo

Paul Marsland

Guest Proxy Season Review:  Paul Marsland is a regular panelist and contributor to publications on corporate governance issues and has served in a number of senior roles at PIRC Ltd the UK based corporate governance consultancy most recently as Head of Policy.

Time to take stock of the proxy season. The proxy season means February in Seoul, October in Sydney, June in Tokyo and April in Paris so August seems as good a month as any for a review. 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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Controlled Companies Carry Negatives

A new study finds that controlled companies – particularly those with multiple classes of shares – generally underperform over the long term. As compared to companies with dispersed ownership, controlled companies experience more stock price volatility, increased material weakness in accounting controls, more related party transactions, and offer fewer rights to unaffiliated shareholders. The study results challenge the notion that multiclass voting structures benefit a company and its shareowners over the long term. Continue Reading →

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Executive Pay

Pay continues to be the biggest issue this proxy season. The May 17 edition of Pirc Alert had several articles on point. In “A challenge to high pay” they discuss some of the findings by the High Pay Commission. Here’s a few choice tidbits from the Commission’s report:

  • attempts to link top pay with company performance only seem to have resulted in pushing up remuneration, with little corresponding step up in business success.
  • the top 0.1% earners – are finance workers (30%), those working in business (38%) and company directors (34%)
  • Excessive rewards are undermining relationships with employees and shareholders; they are encouraging harmful risk taking and creating an economic elite which wields enormous power but appears to have lost touch with how the rest of us live.
  • Defenders of high pay talk about executives being poached by international competitors but only one FTSE 100 company has been the victim of poaching in the last 5 years, that was from another British firm.
  • a feeling that business leaders are ‘in it for themselves’ pervades all discussions on the behaviour of businesses.
  • 58% of people either agree or strongly agree there is one rule for the rich and another for the poor; 18% disagree
  • The failure of our corporate governance system means that we are now paying more and getting less

The Commission will now look at options, such as “reforms of the Remuneration Committees and the inclusion of other stakeholders.” PIRC has also argued that introducing dissident elements onto committees may restrict excess. We look forward to the Commission’s recommendations later this year.

Yesterday Broc Romanek reported “four more companies filed Form 8-Ks reporting failed say-on-pay votes: Helix Energy Solutions (34%); Curtiss-Wright (41%); Intersil (44%); and Cincinnati Bell (34%). I keep maintaining our list of Form 8-Ks for failed SOPs in CompensationStandards.com’s “Say-on-Pay” Practice Area.”  His list was up to 24 when I looked yesterday; it could be higher today. See the agenda for their upcoming November 1 conference.

Thanks in part to “say on pay,” U.S. directors are receiving less opposition from investors this season. As of May 12, the average “withhold” vote was 4.7 percent, as compared with 5.5 percent last year. At S&P 500 companies, the average opposition rate has fallen from 4.1 percent in 2010 to 3.9 percent this year, according to ISS data. (Advisory Votes Help Shield Directors From Investor Dissent, Ted Allen, ISS, 5/19/2011)

The United States Proxy Exchange (USPX) released draft guidelines for shareowners to use in making say-on-pay voting decisions. Our guidelines call for a no vote on “say-on-pay” when the ratio of CEO pay to average workers exceeded a shareowner specified threshold or when the CEO was higher than the median. We also recommend voting against compensation committee members when shareowners vote down pay packages.

Is this a good strategy, or should we wait until the following year to vote out compensation members who don’t take voting down pay packages seriously? That seems to be the strategy of many shareowners this year. What are your ideas on how to ratchet down pay packages that seem to rise every year, regardless of company performance and oblivious to the widening gap between the super-rich and the rest of us?

Comment letters are due by June 2nd to [email protected]. Please put “Say-on-Pay Guidelines” in the e-mail subject line. Letters will be posted to the USPX website, unless you indicate you would rather remain anonymous.

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Why Routinely Approve Auditors?

Ever since the demise of Enron, I’ve wondered why the vote by shareowners to approve auditors is considered such a routine nonevent. Ask anyone who used to work for former big five firm Arthur Andersen LLP. Yet, “ratification” of auditors remains among the last holdouts of broker voting.

Who watches the watchers in the world of big business? That question is asked by corporate governance consultant Pirc in its Annual Stewardship Review. Reviewing voting results over the last five years, they couldn’t find a single instance of any vote of more than 20% against an auditor appointment. According to Alan MacDougall, managing director at Pirc:

We’re surprised that even after the financial crisis, shareholders don’t seem to make the connection between value destruction and the fairly closed world of auditing UK plc.

John Gray, a member of the investment panel of the London Borough of Tower Hamlets pension fund, says trustees and local authority panels need to devote far more time to their fiduciary duties. He shows faith in the newly formed Association of Member-Nominated Trustees.

The FT article ends with a quote from Lord Myners: “You don’t wash or service a rented car because you expect to give it back. I still get the impression that shareholders treat their holdings like a rented car. For the efficient use of capital, that attitude has to change.”

via FT.com / FTfm / FTfm Structured Products – Review questions positon of auditors.

Pirc makes valid points that his American counterparts should also be raising. Where was/is the outpouring of votes against the auditors who dropped the ball in their audits of American banks during and proceeding the financial crisis?  Shouldn’t we be voting down auditors who so obviously failed us?

The best solution I have seen is Mark Latham’s proposal that would allow shareowners to recommend auditors from a pool of qualified applicants, rather than asking us to approve one chosen by management.  For an example, see Latham’s proposal to USG dated November 17, 2002 at VoterMedia.org.

I also like the idea of an Association of Member-Nominated Trustees. The closest the US comes to that, as far as I know, is the effort led by CalPERS and CalSTRS to develop a primarily digital resource, the Diverse Director DataSource (or 3D), devoted to finding untapped diverse talent to serve on corporate boards. (see 3D Advisory Panel Named)

It would be good to see this group or another also take on the additional aims of the UK’s Association, which include:

  1. To support the development of member nominees and to enable them to perform their role to the best of their ability.
  2. To provide member nominees with a collective voice, and if desired, to lobby on pension matters with the Regulator, within the pensions industry and through the professional associations and trade bodies.
  3. To provide or guide access to training services which meet member nominees’ needs.
  4. To help identify and champion best practice among pension schemes – including scheme governance, performance and communications.
  5. To provide a networking environment through which member nominees can share their experiences and challenges with other member nominees in confidence.
  6. To provide support for sponsors through targeted services – including for example a member nominee selection process.
  7. To conduct research or studies which may help MNs become more effective in their performance.

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Compensation Committees Should Include Employee or Shareowner Representatives

The membership of remuneration committees should be widened to allow employee or shareholder representatives to participate in order to make their operation more effective and facilitate pay restraint, according to Europe’s largest independent proxy agency PIRC.

In its submission to the Department of Business, Innovation and Skills (BIS) consultation on short-termism, PIRC argues that encouraging remuneration committees to hear divergent views could improve decision-making. This might include allowing employee or shareholder representatives to participate. PIRC’s proposal is influenced by research into group decisions by Cass Sunstein, co-author of the book Nudge which has influenced Coalition thinking on designing effective policy. Alan MacDougall, PIRC’s managing director, said:

Various solutions have been tried over the years to address accelerating executive pay with little success. It is time that we looked properly at the dynamics of remuneration committees. Broadening the membership to include different viewpoints could improve the decisions committee members make, and introduce some restraint where it has clearly been lacking. Given the Coalition’s interest in the policy applications of research into behavioural influences this seems to be an idea whose time has come.

PIRC also calls for the UK Government to consider the benefits of putting more ‘sand in the wheels’ in respect of merger and acquisition activity. PIRC suggests that the Government carry out proper analysis of the benefits of introducing a minimum holding period before shareholders can vote on acquisitions, upping the threshold for a deal to be passed, and giving shareholders in the acquirer a vote. According to MacDougall.

There are compelling arguments for ensuring that the long-term owners of public companies have the opportunity to have more of a say on proposed acquisitions. It is also interesting to note that under the current legal framework it can be more difficult to change a company’s articles than to decide who owns it. It seems entirely legitimate to question whether this is an appropriate balance.

To help embed stewardship responsibilities within pension funds, PIRC suggests that pension fund trustees be required to undertake an annual review of how they have met their responsibilities as owners during the year. PIRC also argues that that the Government should define fiduciary duty as it applies to institutional investors’ stewardship activities.

PIRC is the largest independent European provider of corporate governance, proxy voting and corporate social responsibility investment research and advisory services. Their clients include pension funds and fund managers with combined assets of over £1.5 trillion.

In books such as Going To Extremes and Why Societies Need Dissent, Cass Sunstein has explored group decision-making. His research into decisions made by US judicial panels with political appointees found that if the panel is made up solely of Democrats they take more ‘liberal’ stances on issues than their individual views would predict, and Republicans shift to a harder conservative position. PIRC believes that a similar process may occur where remuneration committees are comprised of individuals who share the same views on high pay.

Shareowners and/or employees on compensation committees could reduce the likelihood of group think. US firms and shareowners should consider similar options. ISS, CalPERS, John Chevedden and others please take note.

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PIRC CorpGov and RI Journalism Awards

In recognition of the important contribution that journalists make in the areas of corporate governance and responsible investment, and to encourage quality journalism, PIRC and Robbins Geller Rudman & Dowd LLP are awarding Corporate Governance and Responsible Investment Journalism Awards. These awards will recognize journalists who are helping record and clearly explain the issues emerging in these vitally important areas.

Journalists are invited to submit three articles demonstrating their skill in communicating developments in corporate governance and/or responsible investment in a clear and accessible way. The winner in each category will receive a cash prize of £1,000, presented at an awards event in London on 15th July. For an entry form, email [email protected]. The closing date for entries is 18th June. Tell them you saw the announcement at CorpGov.net.

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CorpGov Bites

“Bank of America persuaded the SEC to drop “proxy access” provision as they negotiated a $150 million settlement of a lawsuit tied to the takeover of Merrill Lynch & Co… The U.S. Chamber of Commerce, which represents more than 3 million companies, has said “activist shareholders” would use proxy access to hijack elections to pursue “political or social issues.”” (SEC Said to Push BofA Proxy Rule in Enforcement Case, Bloomberg.com, 2/18/10)  “SOX substantially beefed up the obligations of the audit committee, at least for Exchange traded companies.  See Section 301 of SOX.  The committee was given the direct authority to supervise and to hire/fire the outside auditor.  The committee was also given the authority to hire counsel without full board approval.” “In the proposed settlement with BofA, the SEC is seeking to augment the authority of the audit committee one more time.  The Commission is giving to the audit committee (not the full board) the authority to hire counsel.  Counsel must not only review filings but must discuss possible deficiencies with the audit committee in executive session, without the presence of the non-indpendent directors.  The latter restriction is significant.” (The Board of Directors and a Review of Corporate Disclosure, theRacetotheBottom.org, 2/17/10)

Interesting, Bloomberg failed to get the Chamber’s new line. “Late last month, for the first time in more than a decade, the US Chamber of Commerce changed the boilerplate language that appears at the bottom of its press releases. The nation’s largest business lobby no longer claims to be “representing more than 3 million businesses and organizations of every size, sector, and region.” Instead, it claims to be “representing the interests of more than 3 million businesses” (emphasis added). The smallness of the tweak masks its major significance: Representing somebody, which strongly implies a direct relationship, is very different from representing their interests. The Chamber is in effect acknowleging that the “3 million” businesses aren’t actually its members… It was forced to admit that its true membership isn’t the 3 million businesses that it has claimed, but something on the order of 300,000.” (Chamber of Commerce No Longer “Represents” 3 Million Businesses, Mother Jones, 2/12/10)

I guess we at CorpGov.net should be claiming to represent the interests of the approximately 100 million Americans who own stocks or mutual funds… but why stop at Americans, since we occasionally cover corporate governance issues in other countries as well?

Apple, lags industry peers on sustainability reporting and has not made public greenhouse gas reduction commitments. Apple shareowners are beginning to vote their proxies on Moxy Vote, based on recommendations from Calvert Investments to support a resolution on on sustainability reporting. (Is Apple green enough?, Mac News)  The problem is there is another proposal seeking a bylaw requiring a board committee on sustainability… and there are all those directors to vote for or against. While I love Moxy Vote and own Apple stock, at this point, in Beta form, I’m disappointed the site has no one to advise me on how to vote the other issues or on the directors. So, I turn to ProxyDemocracy.org and even they have collected no votes in advance of the 2/25/10 meeting from “ten institutional investors that are particularly engaged in corporate governance.” I’ll wait until next week to vote.

Eric Jackson does a nice job interviewing John Gillespie and David Zweig, co-authors of “Money for Nothing.”  Gillespie says we won’t have real change until the old players like Bernanke, Geithner and Summers leave. Zweig says, “corporate governance needs a new name to encourage change, maybe corporate democracy.” (Corporate Governance Role in Meltdown, TheStreet.com, 2/17/10) See my review under the heading Fix the Boards – Fix the System. Buy the book.

“Advocates of genocide-free investing won another important victory this week, when American Funds, a family of mutual funds with more than $775 billion in investments, decided to divest virtually all its holdings in PetroChina. Before a shareowner meeting held on November 24, American Funds owned 167 million shares in PetroChina, worth $190 million.”  “Investors Against Genocide advanced a resolution asking that the Board of American Funds “institute procedures to prevent holding investments in companies that…substantially contribute to genocide or crimes against humanity.” American Funds opposed the measure, and affirmative votes for the proposal ranged from 8.5% to 11.8% at the meeting.” (American Funds Sells PetroChina Holdings, SocialFunds.com, 2/18/10) The showing on their resolution would have probably been much higher had voting instructions issued by Broadridge actually complied with the requirements for proxies to clearly indicate the voting topic instead of simply referencing “a shareholder proposal described in the proxy statement.” Broadridge could get away with it because that the language the issuer wanted and since Broadridge uses a voter information form, they don’t feel they are bound by SEC requirements that apply to proxies. (see our coverage of that issue at Investors Against Genocide Fighting American Funds, Broadridge and Vague SEC Requirements: More Problems Solved Using Direct Registration.

Corporate governance advisory firm PIRC made history again. In January 2009 they took a radical step, and began publicly disclosing via their website the voting recommendations they make for company meetings. Now they have set out have set out six best practice principles for corporate governance advisors, as follows:

  • Clear voting policy guidelines should be made available to clients, the companies whom the adviser is monitoring and to the market;
  • Clear audit trail and explanation of the process for assessing companies and making voting recommendations should be available to clients and the companies monitored;
  • Possible conflicts of interest should be disclosed to clients and to companies monitored and, where necessary, to market regulators (i.e. paid consulting with companies);
  • Companies monitored should be given reasonable opportunity to comment on voting recommendations made and the basis of such recommendations;
  • Voting agencies should routinely report to clients on actions taken on their behalf;
  • All voting recommendations made by a voting adviser should be publicly disclosed post-meeting. (Corporate governance agencies: the need for transparent voting decisions by Tom Powdrill on Responsible Investor, 2/18/10)

The Securities and Exchange Commission Investor Advisory Committee will meet in DC on February 22 at 9 a.m. The agenda for the meeting includes consideration of a Committee recusal policy, a report from the Education Subcommittee, including a presentation on the National Financial Capability Survey, a report from the Investor as Purchaser Subcommittee, including a discussion of fiduciary duty and mandatory arbitration, a report from the Investor as Owner Subcommittee, including recommendations for the Committee on Regulation FD and proxy voting transparency, as well as reports on a work plan for environmental, social, and governance disclosure and on financial reform legislation, and discussion of next steps and closing comments. I’ll be tuning into the webcast if time permits.

The Conference Board issued a new report, Directors’ Duties under the New SEC Rules on Disclosure Enhancement, available to members. From my quick review, the report appears comprehensive but written clearly and in an easy to understand format. Highly recommended for directors, their advisors and monitors. Additionally, the SEC posted six new Compliance and Disclosure Interpretations 116.07, 117.05; 119.21, 119.22 and 119.23, which offer guidance on disclosure under Items 401, 402(a), and Item 402(c) of Regulation S-K. Staff also added new question 121A.01 related to Exchange Act Form 8-K, which explains calculation of the four-business day filing period for disclosing the results of a shareholder vote. See also  guidance on the new requirements from Compliance Week issued in January and December as well as the original rule. Additional guidance from the Altman Group, Walking the Tightrope – New Proxy Disclosures on Director Qualifications, Board Risk Oversight and Board Diversity – and new Climate Change Disclosures for the 10K.

The Corporate Library’s ‘2010 Proxy Season Foresights #3: The Growth of Clawback Provisions, ($15) found that the number of companies with clawback provisions continued to increase in 2009, and almost half of such companies are smaller-cap firms outside the Russell 1000.

The Centre for Corporate Governance Research (CCGR) is organising its 8th International Corporate Governance Conference on Wednesday 23rd June 2010, to be held at the University of Birmingham, UK.  The theme of the conference is ‘Corporate Governance and Sustainability’. Keynote speakers include Colin Melvin (Chief Executive, Hermes Equity Ownership Services Ltd), Dr Michael Blowfield (University of Oxford) and Dr Beate Sjåfjell (University of Oslo). Sir Adrian Cadbury, the CCGR’s External Advisor, will be attending the event. Papers are invited on issues relating to any area of corporate governance and sustainability. Papers should be sent as an electronic copy in PDF format, by 31st March 2010 to Karen Hanson.

Moxy Vote is running a series, Here’s to the many pioneers!, Part 1 includes yours truly, Jim McRitchie, along with Mark Latham, Andy Eggers and Matt Keenan. Part 2 will include Glyn Holton, Nell Minow, and the Social Investment Forum. I’m blushing to be in such company. Thanks to Mark Schlegal and to all the fine work at Moxy Vote for facilitating involvement by retail investors and providing advocates such an important pipeline of influence.

The Council of Institutional Investors (CII) published a White Paper, The OBO/NOBO Distinction in Beneficial Ownership: Implications for Shareowner Communications and Voting, authored by Alan Beller and Janet Fisher of the law firm Cleary Gottlieb Steen & Hamilton LLP.  Mr. Beller is a former Director of the SEC’s Division of Corporation Finance. From the Executive Summary:

The SEC is likely to be cautious in seeking to change the current framework in significant ways, at least in the near term. Defining the objective is critical to developing a proposal. If the goal is to increase the ability of shareowners and companies to communicate directly, a number of incremental steps may be taken to address the OBO/NOBO distinction and facilitate direct distribution of proxy materials, without discarding the current distribution platform. Such an approach could lead to meaningful improvements, without seriously affecting the interests of many of the participants in the current framework, and we believe it has a greater chance of widespread support than more radical alternatives… On balance, we believe that the immediate interest of shareowners and companies in better communications would be better and more effectively served with an incremental approach that promotes less reliance on — or eliminates altogether — the OBO/NOBO distinction and otherwise increases the potential for direct communications.

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