Posts Tagged 'United States'

The Boardroom Strikes Back

by Steven Davidoff Solomon for The New York Times

This year’s proxy season is turning out to be more hostile than ever, as companies fight back against hedge fund activists.

Companies typically have their annual meetings in the late spring, like the blooming of tulips, and they attract hordes of shareholder activists looking for profits. The activists will often try to elect directors, making proxy season not a reminder of the warming spring but a clarion call for the barbarians at the gate.

Last year, the activists won a series of stunning victories at Darden Restaurants, Sotheby’s and the real estate investment trust now known as Equity Commonwealth, among others. In each case, the companies refused to bow to the activist agenda, preferring instead to try to prevent the activists from electing directors. Each company lost after spending millions of dollars, wasting both money and their boards’ reputations.

The losses actually came as no surprise. In 2014, activists had a 73 percent success rate in electing directors, according to FactSet’s corporate governance database, SharkRepellent. Given the odds, many, including me, predicted that this year’s proxy season would be all about settling as companies sought to avoid these types of bloody losses. This would be the year that shareholder activists dominated completely as companies ran for cover.

We were wrong. Read more here.

Investors fight for greater say on boards

by Stephen Foley for The Financial Times

A campaign to win shareholders a greater say over who sits on corporate boards has exposed a rift between some of the largest asset managers in the US.

Votes on so-called “proxy access” — the right for long-term shareholders to nominate directors — have passed at two US companies, but gone down to defeat at three others.

Over 100 US companies are facing votes on the proposal in the coming weeks, as proxy access has become the largest corporate governance cause of this year’s season of annual meetings.

Fidelity, one of the largest holders of US company shares through its popular mutual funds, is opposing the push for proxy access, even when a company’s management itself supports the idea.

But BlackRock, the world’s largest asset manager, has said it will support most of the proposals, while T Rowe Price and TIAA-CREF are among its most enthusiastic supporters.

Most of the proposals on the ballot this year have been put forward by large public pension funds, including the New York City retirement system and Calpers, the Californian public employees’ fund.

Vanguard, the $3tn asset manager whose stock market tracker funds hold a piece of most US companies, is voting against the bulk of the proposals, preferring a weaker form of proxy access than is on the ballot at most companies.

The public pension funds are pushing a plan that would allow a shareholder or group of shareholders who have held stock for three years, and who hold 3 per cent of a company between them, to nominate board directors. The Securities and Exchange Commission was originally going to make proxy access compulsory, but a legal challenge prevented it from doing so. Read more here.

 

Faith-Based Shareholder Plans to Pressure Wells Fargo and Citi

by Sarah Krouse for The Wall Street Journal

A religious shareholder group that has in recent months pressured two of the largest U.S. banks into publishing reviews of their business standards, is out to repeat the feat at Wells Fargo WFC +2.48% and Citigroup C +2.75%.

The Interfaith Center on Corporate Responsibility will Friday afternoon have a teleconference with Wells Fargo officials to discuss the bank’s internal standards and the publication of details of them.

The organization, which represents groups with over $100 billion of invested money, is planning similar talks with Citi in the coming months, according to Seamus Finn, chairman of the ICCR board.

Mr. Finn said: “It would be helpful for us as investors and the general public to have one place to go to see what changes they’ve put in place since the 2008 financial meltdown.”

The ICCR declined to comment on the size of the collective stakes its members hold in Wells Fargo and Citi.

A spokesman for Wells Fargo said: “We have appreciated the engagement we’ve had with them in the past and we meet with them from time to time.”

A spokeswoman for Citi said: “Citi has long enjoyed a productive dialogue with the members of the ICCR.”

The moves come as investors and regulators step up efforts to ensure the world’s largest banking institutions address issues of culture and behavior. These efforts follow a string of high-profile scandals in the banking world, ranging from benchmark manipulation to sanction violations, that have cost banks billions of dollars in fines and huge reputational damage. Read more here.

The divine right of the imperial CEO

By John Plender, May 26th 2013, Financial Times

So there it is. The divine right of the imperial chief executive to combine the roles of chairman and CEO in the US remains intact for now. That much is clear from the protest vote of only 32 per cent against Jamie Dimon at JPMorgan Chase’s annual meeting last week, down from 40 per cent last year. But what does it tell us about the state of corporate governance after the crisis?

First, it confirms the remarkable weakness of shareholder rights in the US, compared with the UK and much of continental Europe. Even if a majority had voted against Mr Dimon, the vote would still have been purely advisory. Under Delaware law, the pre-eminent jurisdiction for big corporations, shareholders can call a meeting to remove a director only if they are the chief executive or a plurality of the directors. And directors can freely resort to poison pills to protect themselves from hostile takeovers.

Shareholders can use the proxy solicitation process to put proposals to the board. Yet the Securities and Exchange Commission, against which it is very difficult to launch an appeal, decides which proposals management has to include on the proxy. The commission’s critics argue that its decisions are remarkably arbitrary. This lack of adequate accountability to shareholders explains why the US is, bizarrely, in breach of OECD Principles, the widely respected governance recommendations. Continue reading…

 

U.S. and Venezuela Tussle for Whistleblowing Kingpin

by Carin Zissis for Americas Society / Council of the Americas, April 5th, 2011.0

Colombian President Juan Manuel Santos is scheduled to host his Venezuelan counterpart in Cartegena on Saturday and, while economic issues may be at the top of their agenda, they’ll also discuss the fate of Walid Makled. Arrested in Colombia in August 2010, the alleged drug kingpin faces charges in the United States and his native Venezuela. Meanwhile, Bogota faces a tug of war when it comes to deciding where to send Makled, also know as “the Turk”. On March 25, Colombia’s Supreme Court cleared the way for his extradition. Santos, who has sought to smooth over rough relations with Caracas, suggested in November that Makled would be sent to Venezuela. But pressure from Washington and the Turk’s pledge to offer U.S. prosecutors evidence of drug corruption among senior Venezuelan may complicate that decision.

The Colombian government will release its final decision by April 15. Between now and then, Santos is not just meeting with Chávez but also traveling to the United States for a UN Security Council meeting and to deliver remarks at Brown University And Makled could also be a subject matter during his U.S. stop. Last week, Senator Richard Lugar (R-IN) urged Santos to send Makled to New York, where a federal court issued the warrant acted upon at the point of his arres. “Makled possesses important information which could aid the United States and a host of other countries in their joint war against drug trafficking,” said Lugar. The U.S. Treasury Department labeled Makled a kingpin in 2009 for running a billion-dollar drug trafficking empire. Lugar and other U.S. legislators say that the chance to gather this information would be lost if Makled gets sent to Venezuela. (continue reading… )

Corporate Governance: Staggered U.S. boards are endangered species

by Erik Krusch for Reuters, March 23rd, 2011.

Classified boards may be moving towards the endangered species list, as investors and even management are hunting them down.

Valero and Biogen Idec’s management teams, for example, are recommending that shareholders approve amendments declassifying their respective boards. Other corporations, such as Alcoa and McDonald’s Corp, however, are fighting their shareholders’ attempts to level their staggered boards. It remains to be seen how many staggered boards emerge from this proxy season unscathed.

Despite the success of classified boards in fending off many hostile acquirers, they can sometimes entrench management and disenfranchise shareholders. Given these possibilities, it should come as no surprise that staggered boards are on many shareholders’ hit list.

The overwhelming trend in corporate governance is towards the declassification of boards and this year is no exception, with several shareholder proposals calling for declassification making their way onto 2011 proxies. Other companies are seeing the proverbial writing on the wall and declassifying their boards. Despite these clear trends, some companies are attempting to quash shareholder declassification proposals and at least one company is asking its shareholders to sign off on a staggered board. (continue reading… )

Comparing CEO Employment Contract Provisions

by R. Christopher Small for The Harvard Law School Forum, November 17th, 2010.

In our paper, Comparing CEO Employment Contract Provisions: Differences between Australia and the U.S., forthcoming in the Vanderbilt Law Review, we compare and contrast CEO employment contracts across two very different common law countries.

In the wake of the global financial crisis, executive compensation is front page news, with soaring rhetoric about excessive pay to ungrateful bank employees and personal attacks on CEOs and other executives. Frequently missing from the discussion, however, are basic facts surrounding the terms and conditions of the executives’ relationships with their firms. While several recent studies in the United States have begun to fill in some of the details surrounding American executive employment contracts, or the lack thereof, none have fully captured the U.S. experience, particularly from a legal perspective. Likewise, none of these studies even touch on Australian CEOs’ contractual employment relationships.

Our empirical study is designed to fill this gap. Our study also provides an additional perspective on the optimal contracting and managerial power models of executive pay in U.S. academic literature. Even if one accepts that a particular model has greater explanatory power in the U.S. context, this will not necessarily be the case in another jurisdiction, such as Australia. The United States and Australia, while enjoying many comparable regulatory features, display interesting differences in terms of capital market and regulatory structures. For example, capital markets in Australia differ markedly from the classic U.S. dispersed model of share ownership. (continue reading… )


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