Archive for February, 2011

Say-on-pay frequency battles a clever diversion

by Dominic Jones for IR Web Report, February 25th, 2011.

IT’S early in the US proxy season, but it looks as if shareholders are set to give directors a stern rebuke on at least one of the two say-on-pay items that are on annual meeting ballots this year.

As reported in this article by contributor Vanessa Schoenthaler of Qashu & Schoenthaler yesterday, shareholders are voting against the recommendations of directors in many say-on-frequency votes, which are meant to advise boards on how often shareowners want to vote on executive compensation.

While directors are mostly recommending that say-on-pay votes be held only every 3 years, shareholders are defying them and mostly voting for annual advisory votes. (continue reading… )


UK’s Davies Report a Sign of Growing Investor Focus on Board Diversity

by Nathaniel Parish Flannery forThe Corporate Library Blog, February 24th, 2011.

According to GovernanceMetrics research, 1 in 3 European companies and almost half of all U.K. companies have no female directors.

Across the globe, board diversity is coming to the center of the public debate on corporate governance reform. According to an article published this week in the New York Times, in many developed markets despite long-standing legal protections, women continue to be grossly underrepresented in the highest echelons of most major public and private institutions.  For example, according to a recent study by the German Institute for Economic Research, there are just 29 women on the boards of Germany’s 200 biggest companies.

GovernanceMetrics found that out of the 4,205 companies we cover in countries around the globe, only one, Pacific Brands Limited (ASX: PBG), an Australian retail company, has appointed a majority of female directors to its board. In reaction to the public debate on boardroom gender inequality, a number of countries around the world have implemented new requirements regarding the inclusion of female directors on corporate boards.

For example, in the U.K.’s Department for Business Innovation and Skills recently commissioned a report on board diversity by the country’s former trade minister, Lord Mervyn Davies.  The report, Women on Boards, which was published today, sets a voluntary quota to encourage FTSE 100 employers to boost the number of women on boards to 25% by 2015. (continue reading… )


An Antidote for the Poison Pill

by Lucian Bebchuk for The Harvard Law School Forum, February 24th, 2011.

In a major decision issued last week, William Chandler of Delaware’s Court of Chancery ruled that corporate boards may use a “poison pill”—a device designed to block shareholders from considering a takeover bid—for as long a period of time as the board deems warranted. Because Delaware law governs most U.S. publicly traded firms, the decision is important—and it represents a setback for investors and capital markets.

The ruling grew out of the epic battle between takeover target Airgas and bidder Air Products. Air Products made a takeover bid for Airgas in 2010, increased it several times, and kept it open until last week’s decision. Airgas’s directors argued that defeating the premium offer would prove, in the long run, to be in shareholders’ interests. As the Chancery Court stressed, however, the directors based their opinion solely on information publicly available to shareholders. Why should shareholders, who have powerful incentives to get it right, not be permitted to make their own choice between selling and staying independent?

Chancellor Chandler stated that he would have preferred to let shareholders make the choice at this stage, as they “know what they need to know . . . to make an informed decision.” But he felt that denying shareholders’ right to choose was required by previous Delaware cases, which recognized directors’ right to block offers out of concern that shareholders would accept them “in ignorance or a mistaken belief” concerning the value of remaining independent. (continue reading… )


Trends developing after first month of Say-on-Pay votes

by Sheppard Mullin for Corporate and Securities Blog, February 22nd, 2011.

It has now been one month since shareholders were able to render advisory votes on the executive compensation provided at their publicly-held companies in accordance with rules adopted by the Securities and Exchange Commission (“SEC”) in January 2011 (“Say-On-Pay”). These rules were promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”).  Our January 28, 2011 blog “Some Interesting New Developments as SEC Adopts Final Say-On-Pay Rules” provides an overview of the applicable rules and requirements. Of the seventy-six Say-On-Pay votes which have been reported on to-date, the shareholders at two companies have voted against approving the executive compensation.

One element of the Say-On-Pay rules is that shareholders also get to vote on how frequently the Say-on-Pay vote will be conducted at their company (“Say-On-Frequency”). In particular, shareholders can provide an advisory vote that states their wishes as to whether the Say-on-Pay vote should occur every one, two or three years. In soliciting the Say-On-Frequency vote, a company’s board of directors can provide its recommendation (or it can provide no recommendation) as to which frequency it believes shareholders should support.

As we recently reported in our February 1, 2011 blog “A Rising Tide for Annual Vote Say-On-Pay Votes), there was an initial trend developing which indicated that shareholders preferred annual Say-On-Frequency. While it continues to be early in the Say-On-Pay process since the SEC’s final rules have only been in effect for one month and there have been only just over seventy-five votes to-date, these initial voting results do indeed continue to demonstrate a shareholder preference for annual Say-On-Pay votes (as opposed to biennial or triennial voting). The annual frequency has received the most shareholder votes at 65% of the companies that have reported on their Say-On-Frequency votes.  This preference for annual voting is particularly evident with respect to those companies which are “Large Accelerated Filers”, as such term is defined under SEC rules (i.e., public companies with a market value of at least $700 million), with the shareholders at over 84% of such companies supporting annual voting. (continue reading… )

UK: women on boards – Lord Davies’ report

by Robert Goddard for Corporate Law and Governance, February 24th, 2011.

Lord Davies’ report and recommendations were published earlier today: see here (pdf). There is further background information, including a podcast,here. Lord Davies recommends (to quote directly from his report):

  • All Chairmen of FTSE 350 companies should set out the percentage of women they aim to have on their boards in 2013 and 2015. FTSE 100 boards should aim for a minimum of 25% female representation by 2015 and we expect that many will achieve a higher figure. Chairmen should announce their aspirational goals within the next six months (by September 2011). Also we expect all Chief Executives to review the percentage of women they aim to have on their Executive Committees in 2013 and 2015.
  • Quoted companies should be required to disclose each year the proportion of women on the board, women in Senior Executive positions and female employees in the whole organisation.
  • The Financial Reporting Council should amend the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity, including measurable objectives for implementing the policy, and disclose annually a summary of the policy and the progress made in achieving the objectives. (continue reading… )


Suddenly, Poison Pills Are Relevant Again

by Frank Aquila for Bloomberg Business Week, February 23rd, 2011.

A Delaware judge’s decision upholding Airgas’s shareholder rights plan comes just as hostile takeover bids are heating up. Columnist Frank Aquila reviews the corporate defense practice

Shareholder rights plans, so-called poison pills, have long drawn the ire of the institutional investor community and have lost favor with Corporate America. But a Delaware judge’s recent decision to uphold Airgas’s poison pill—followed by Air Products & Chemicals’s prompt termination of its hostile bid—confirms that rights plans are still the most potent takeover defense available to targets of unsolicited bids.

The unsolicited offer by Air Products (APD) for Airgas (ARG) has been one of the longest-running hostile bids in recent memory. Seeking to bring its offer for Airgas to a resolution, Air Products asked the Delaware Chancery Court to invalidate Airgas’s poison pill. Although the case centered on the facts in that corporate saga, the Feb. 15 decision by Judge William B. Chandler III to affirm Airgas’s shareholder rights plan has broader implications at a time when unsolicited bids are again becoming a common tool for strategic buyers.

Unsolicited offers have picked up since the subprime mortgage crisis. To be sure, today’s unsolicited bids are not triggering the hostile takeover fights of days gone by, which unalterably changed Corporate America. The nomenclature that developed around the bids of the 1970s and ’80s justifiably evoked the imagery of pirates and raiders. The terminology remains the same, but the nature, tactics, and objectives of strategic buyers have little in common with those employed by the greenmailers and corporate bust-up artists of that era. (continue reading… )


Six challenges of governance, risk management, compliance

Press release issued by Predictive Communications, February 23rd, 2011.

Corporate governance, risk management, and regulatory compliance (GRC) are no longer the exclusive province of Sarbanes-Oxley. Powerful market forces – globalisation, increased mergers and acquisition activity, heightened regulatory scrutiny, tight operational budgets, and escalating environmental concerns – are all pushing your company to develop and implement a comprehensive GRC initiative to protect itself, while remaining agile and competitive.

Successful GRC initiatives demand an integrated and enterprise-wide view of risk and compliance. As a result, your business requires access to all its data, regardless of where it resides and the form it takes.

It must be available to users and applications when, where, and however needed. And your business needs to be confident that its data is available, complete, accurate, consistent, auditable, and secure.


* Limited visibility and transparency. Your enterprise data is located in different systems and unconventional formats and unstructured files, such as PDFs and PowerPoint presentations. You need to increase visibility into and transparency of GRC activities across the enterprise, but you lack a comprehensive, cross-enterprise view of GRC-relevant information.

* Questionable data quality. You need to base GRC activities on reliable, high-quality data. But you’re unable to identify data quality issues that affect GRC-related reports. Fixing data quality errors, such as those caused by human error, database corruption, and system consolidations from past mergers and an acquisition is a cumbersome and time-consuming process. (continue reading… )



Why Shareholder Democracy is Essential

by Nell Minow for, February 23rd, 2011.

John Carney, the business journalist, doesn’t like shareholder democracy.  He argues that reforms, such as say on pay rules, which give shareholders a non-binding vote on executive compensation, won’t improve corporate governance anymore than electoral reforms have improved our government.

But his views are based on antiquated notions about shareholders, and a distorted view of democracy and capitalism.  Here is some of what he overlooks:

1. Shareholders can make informed decisions. Carney makes the paternalistic and management-centric “shareholders are stupid” argument, sometimes referred to by economists as “rational apathy.” In a blog post for, he wrote:

At the corporate governance level, the problem is that things like say-on-pay introduce complicated elements into proxy elections. These complexities make it difficult for ordinary shareholders, typically equipped with only a passing interest and knowledge of the issues at hand, to form preferences, much less vote their preferences. (continue reading… )


A Push For More Women On Corporate Boards

by NPR STAFF for NPR, February 23rd, 2011.

The chief executive of Germany’s largest bank, Deutsche Bank, recently said that a woman on his company’s board of directors would make the board “more colorful, and prettier.”

Josef Ackermann’s comment sparked an outcry, in part because it comes as his country debates a law that would require companies to put more women on corporate boards. (Currently there are no women on the board of Deutsche Bank.)

Great Britain is also debating this question. France is phasing in a law. Spain has had a law since 2007. All would follow Norway, which in 2005 passed a law mandating that at least 40 percent of corporate boards’ members be women.

Adrian Wooldridge, a columnist for The Economist magazine who writes about business trends, tells NPR’s Steve Inskeep that in many parliaments there is a sense that companies should be more representative of the population. “So you see some parliaments where you are beginning to get up to 50 percent representation in parliament, so these politicians sit back and think, ‘Why is the corporate boardroom so different’?”

According to surveys in industrialized countries, women make up, on average, 10 percent to 12 percent of corporate board directors. In the U.S., according to a new report by the Deloitte Global Center for Corporate Governance, women make up 15.2 percent of Fortune 500 company boards. In a sample survey of 1,754 listed companies, women made up 12.2 percent of board directors. (continue reading… )


Apple shuns call for succession plan

by Stephen Foley for The Independent, February 23rd, 2011.

Apple’s board needs to reassure shareholders that it has a plan in place should Steve Jobs not be able to return to his duties as chief executive of the technology giant, dissident investors will argue at the company’s annual meeting today.

The health of Apple’s visionary chief executive – who is on an indefinite medical leave – is sure to be centre stage when shareholders gather in California, where the board is trying to squash a proposal that would force it to publish a formal succession plan. Activists from an Illinois pension fund are demanding new details on how the company has been planning to deal with a leadership change, should one become necessary, and they say they expect wide support.

“The last thing we want is for Steve Jobs to step down. His is the classic American success story, coming from nothing to run the second-largest company in the country. We would like him to be there forever, but that is not realistic,” said Jennifer O’Dell, corporate governance chief for the Central Laborer’s Pension Fund, who will argue for the dissident resolution today.

“We have seen lots of examples of imperial CEOs, and ultimately they have come to harm their companies and their shareholders. We are long-term shareholders, and we want to know that the company is thinking about the future.” (continue reading… )




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Blog da Governança

(in Portuguese) A weekly chronicle about shareholders' rights & duties, activism and capital markets regulation, by Renato Chaves.


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