Corpgov Bites

The Shareholder Activist - Corpgov BitesWhen I started posting in 1995 I could come home from work, do a quick search on Alta Vista (before google) and read everything posted on corporate governance in a few minutes. Now searching “corporate governance” brings up 34 million results and 200 “personal results,” which looks like posts from people in my google+ circle. Who can keep up. Here’s a few recent items worthy of note:

No one does a better job of looking ahead at the proxy season than Patrick McGurn. His The Dirty Dozen: Shareholder Issuesshould be of interest to just about everyone who stumbles onto corpgov.net.
Broc Romanek writes on pay equity. Wow, the radical side of Broc comes out:

There are still too many cases of underachieving CEOs earning a lifetime’s worth of money in a single year. Sometimes they are fired before a year of service is even over – yet they walk off with a more than generous severance package. And this is not just a handful of outliers – this is the norm. It is far past time to do something about it.

He goes on to make an impassioned plea for more companies look at internal pay equity, like those used by DuPont, Whole Foods and a handful of others. Milder, but still worth a scan is Anthony Galban’s piece for the Conference Board, Boards Beware of Growing Executive Compensation Packages.

Robert Kropp’s CalSTRS to Facebook: More Women on Board provides the best coverage I’ve seen on this crazy IPO so far. Be sure to click on several of the linked articles as well.

The New York Stock Exchange (NYSE) released Information Memo 12-4, Application of Rule 452 to Certain Types of Corporate Governance Proxy Proposals, establishing significant new restrictions on broker discretionary voting. Listed were the following:

  • Destaggering a company’s board of directors;
  • Majority voting in the election of directors;
  • Eliminating supermajority voting requirements;
  • Providing for the use of consents;
  • Providing the right to call a special meeting; and
  • Certain types of anti-takeover provision overrides.

Although the NYSE clarified that ratification of auditors remains subject to broker votes, it is unclear to me just what else does and why. Of course, I’d like to see no discretionary broker votes, which I see as just another form of management’s thumb on the scale, along with the whole issue of blank voting.

Anatomy of a Shareholder Vote Calculation – A 2012 Update by Vanessa Schoenthaler, a corporate and securities partner at Qashu & Schoenthaler LLP. will help you understand just how unnecessarily complicated the proxy voting system is. Again, blank votes going to management aren’t covered.

Vanessa also bring us news of SEC’s New C&DI: How to Describe A Say on Pay Proposal on Your Proxy Card. I was pleasantly surprised to see the CD&I apply both to proxy cards and voting instruction forms. 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.” However, 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.

I’m always happy to see Alyce Lomax reaching out to retail investors on the popular Motley Fool site. Hey, Shareowners: Don’t Give Up Now. “This year very well could usher in more and more shareholder victories against negative corporate conduct that’s contrary to shareholder value, such as high CEO pay for low business performance… In 2012, let’s send the message that we’re paying real attention to how the companies we’ve put our hard-earned capital into are managed.”

Another popular site for retail investors is thestreet.com. Happy to see Richard S. Levick‘s opinion piece, Revolution in the Boardroom. Levick lists some of the major development’s so far, including newly filed proxy access proposals.

The democratization of Wall Street is under way. As a result, management structures that fail to align their priorities with those of their investors will face tougher challenges than ever before in 2012 and beyond.

14 pension funds and plan sponsors representing $1.6 trillion in assets called on the SEC to complete what they called “unfinished business” in the wake of the financial crisis, including:

  • Appoint the Investor Advisory Committee to provide the Commission with investors’ perspectives on regulatory issues; appoint the Investor Advocate to champion investor rights.
  • Renew rulemaking for universal proxy access so that investors can propose directors for boards on a level playing field with management.
  • Adopt final rules on the remaining executive compensation reforms under the Dodd-Frank Wall Street Reform and Consumer Protection Act;
  • Continue work on International Financial Reporting Standards to ensure high quality accounting in global markets.
  • Provide for an accountable and transparent ratings system with full disclosure on data and models used to develop securities ratings. Develop an independent mechanism to track the accuracy and effectiveness of the ratings process and complete the study of financing alternatives for credit rating agencies.
  • Clarify and ensure compliance with the Commission’s interpretive guidance on climate risk disclosures. Include climate change disclosure and the process for including diversity considerations into the corporate board nomination process in the newly created Investor Advisory Committee’s overall mandate to provide advice and recommendations. Ensure that relevant environmental, social, governance (otherwise known as sustainability issues) and diversity reporting is integrated into financial reporting frameworks.

Just a passing observation: The SEC posted a few no-action decisions yesterday but their pace is behind last year’s. Hopefully, that means they are giving substantially more thought to their responses.

To contact James McRitchie directly, please email jm@corpgov.net

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Posted in Featured, Shareholder Activism Contributors, Shareholder Activism Spotlight, Shareholder Proposals | 1 Comment

One Response to Corpgov Bites



  1. Christopher Bayer, Ph.D. says:

    “Ain’t No Stoppin’ Us Now!”

    McFadden & Whitehead (no they are not a New York securities law firm) produced this lively, powerful tune in 1979 foreshadowing shareholder activism (without even realizing it), and just look at where we are now.

    Their lyrics resonate with the mission: “Ain’t no stopping us now…We’re on the move…Ain’t no stopping us now…We’ve got the groove!”

    As McRitchie cogently notes: in less than a generation corporate governance, bolstered and fueled by shareholder activism, has grown into a mega global force. We have a voice, and we are becoming a thundering herd. Shareholders are entitled to equity, consideration, acceptance, respect, and acknowledgment. Human nature. Frankly, how could it be any other way. Are public corporations still riddled with arrogance bordering on hubris, pathological narcissism and psychopathy? Not on our watch if we can help it.

    Keep in mind we co-own the company. We demand proper stewardship of our hard earned monies. Most shareholders live in the real world. Many do their own laundry, and drive their own car. We are willing to pay for talent, but it must be earned, warranted, and monitored accordingly. Aside from wanting to create a ruling class and firm up the brand, why should American CEOs earn more than 25 times their Euro-Zone counterparts? Do we enforce a metric that correlates compensation with performance? Not strongly enough.

    I, together with James McRitchie, salute Patrick McGurn, Broc Romanek, Anthony Galban, Robert Kropp, Vanessa Schoenthaler, Alyce Lomax, and Richard S. Levick for their great work, persistence, and creativity in promoting proper corporate governance. They are true shareholder activists, and there “Ain’t No Stoppin’ Them Now!”

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