Tag Archives | theRacetotheBottom.org

Best Coverage of SEC Proxy Advisory Services Roundtable

theracetothebottomTheRacetotheBottom has by far the best coverage I’ve seen on the SEC’s roundtable. Congratulations. Those interested in the tweet stream during the event can check out Proxy Advisory Services Roundtable: Tweets & Links to Analysis.

Of course, there was no one invited to the Roundtable to represent the interests of retail investors… left out again. My biggest disappointment is that no one mentioned the possibility of proxy advisor contests, such as what I proposed at Cisco. See Cisco: How Our Proxy Competition Would Work – The Short VersionContinue Reading →

Continue Reading ·

Corporate Governance Quick Bites

Holly Gregory

Holly Gregory’s post Applying Securities Laws to Social Media Communications is the best I’ve seen on when the SEC’s Enforcement Division is likely to recommend an enforcement case to the Commission based on the potential for liability arising from disclosures by corporate officers through social media.

As widely reported, including by WSJ, Netflix and CEO Reed Hastings both received Wells Notices from the SEC, related to something Hastings wrote on Facebook back in June 2012. (Netflix Gets Wells Notice Over CEO Hastings’ Facebook Post, 12/6/2012) Continue Reading →

Continue Reading ·

SEC Fails to Appeal on Proxy Access

The SEC will not challenge the decision of the U.S. Court of Appeals for the District of Columbia Circuit, No. 10-1305, which struck down the agency’s rule to make it easier for shareowners to nominate directors to corporate boards.

The announcement, made late on Tuesday by SEC Chairman Mary Schapiro, marks a major blow to large investor advocacy groups. In a statement, Schapiro said the SEC has no plans to seek a rehearing before the appeals court or a Supreme Court review. But she said she remains “committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.” (SEC will not seek rehearing on proxy access rule, 9/6/2011)

Given the composition of the DC Circuit and the Supreme Court, perhaps such an appeal would have had little chance. However, by letting the decision stand the SEC now faces a bad precedent. As a letter from the Council of Institutional Investors pointed out:

It is well-settled “that ‘a court is not to substitute Continue Reading →

Continue Reading ·

BRIC Project Anticipates ICGN's Theme

ICGN’s annual conference, this June held in Toronto, is on “The Changing Global Balances.” It just so happens that students at theRacetotheBottom.org are also exploring a good portion of this phenomena with a series “The BRIC Project,” which began on April 1, 2010. Dan O’Connell will write posts about corporate governance practices in Brazil.  Rich Jasik will do the same for Russia.  Kinny Bagga will examine India, with Dan Snare exploring corporate governance in China. Here’s a few fascinating observations from day one:

  • Between 1997 to 2006, the cumulative volume of foreign portfolio investment into shares of companies located in BRIC countries grew to $697 billion from $70 billion.
  • Brazil, Russia, India and China made up more than 50% of world GDP back in 1800, make up about 15% now are are likely to again make up 50% by 2050.
  • BRICs already contribute almost half of global consumption growth.
  • Being invested in the right markets—particularly the right emerging markets—may become an increasingly important strategic choice for corporations.
  • “Conditions for Growth” include macro-economic stability supported by price stability via fiscal deficit reduction, institutions, openness to trade and foreign direct investment, and education.
  • Corporate governance remains one of the most important factors constraining the BRICs’ attractiveness to potential long-term shareholders. Less active minority shareowners and large share concentrations inhibit market-driven changes in control.

I look forward to future posts in this interesting series.

Continue Reading ·

Dodd Bill: Majority Vote Provisions

Senator Dodd  finally introduced his bill. I’m sure it will get a massive coverage and comment. I will have little to add. Find a quick overview at The Corporate Library (Dodd’s Bill, 3/15/10). The Dodd Bill: Weighing In at a Portly Six Pounds, by Broc Romanek at TheCorporateCounsel.net/Blog provides the best guide I’ve seen.

However, I would also draw your attention to Restoring American Financial Stability Act of 2010: Reforming the Independent Director Standard and Federalizing Executive Compensation and other posts by J. Robert Brown at theRacetotheBottom.org, 3/16/10. Brown brings to our attention a couple of good “sleeper” provisions that may help override provisions now controlled by exchanges and Delaware. However, he also points with disappointment to a requirement for listed companies that directors be elected by majority vote in uncontested elections.

The legislation would merely require directors not receiving a majority to resign.  The board would then have the discretion to reject or accept the letter.  As RiskMetrics has noted, somewhere around 100 directors in 2009 did not receive a majority vote and none of them lost their position because of this failure.

In many cases, companies did not have a majority vote provisions in place.  But where they did (Axcelis and Pulte), the companies did not accept the letters of resignation.  In other words, these provisions do not provide shareholders with any additional rights or protections.  Directors lose but the board doesn’t remove them.  The provisions are, therefore, a myth.

I hope CII and others will take up this issue. Brown writes, “Real reform would provide that directors who do not receive a majority lose and cannot take office.” I’m willing to concede there may be circumstances where that could create a problem. However, if a board doesn’t accept a resignation, they should be required to immediately find a replacement and do so within six months.

Continue Reading ·

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.

Continue Reading ·

Advocacy websites offer hope

Nice article by that title appeared in Canada’s Financial Post. “Imagine a democracy where those who don’t vote have their ballots automatically cast in favour of the incumbents… Enter an idea whose time has come: websites such as corpgov.net, shareowners.org (corrected), proxydemocracy.org and moxyvote.com. These are just four offerings on the Internet designed to help disgruntled shareholders organize and register their displeasure or lobby for change.” (1/26/2010) Prior article was entitled Shareholder democracy oxymoron (FP, 1/25/2010)

Reporter, Diane Francis, goes on to compare our sites to the Politics 2.0 social movement that elected Obama. She concludes with a quote from former New York governor Eliot Spitzer from an article in the Wall Street Journal. “Virtually every thoughtful discussion of corporate governance concludes that unless shareholders act like the true owners they are, all the proposed corporate reforms will fail. While there are some who claim shareholders are simply too ill-informed to participate meaningfully, this argument should carry no more weight in the corporate context than it does in the traditional political arena.”

I certainly hope the sites mentioned by Ms. Francis, and others such as isuffrage.org, Lemonjuice.biz and theRacetotheBottom.org, can foster the type of movement that changed politics… and I hope we can do it sustainably.

Continue Reading ·

Powered by WordPress. Designed by WooThemes