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2010 Proxy Season

Introduction to 2010 Proxy Season Hot Topic

January 2010

The annual corporate electoral process – the “proxy season” for shareholders – is shaping up to be a period of intense communication for a number of public companies in 2010. 

There are new rules from the Securities & Exchange Commission regarding public communication on the qualifications for nominees standing for election to corporate boards.  What are their skill sets…their experience in board matters…their education and background…why they are qualified to represent the interests of the shareowners who elect them?  These will have to be spelled out for proxy voters.  (This also includes presenting the same justifications for board members now serving who may not be up for election.)

The opening of “proxy access” to shareowners under SEC Chair Mary Schapiro’s reign seems to be encouraging long-term shareowners (with specific levels of holdings) to consider becoming more involved in the director nominating process.  “Democracy” may be said to be coming to one of the last prominent holdouts in the American society, the publicly-held corporation (or at least the most widely-held companies).

The issues that some shareowners and their asset managers care about are in some cases becoming much more important year-to-year for owners and advocates.  Continued globalization of business activities puts the corporate supply chain policies, practices and behaviors in sharper focus, and thus specific issues related to human rights, labor rights, diversity, treatment of indigenous peoples, forestry management, environmental management and many more dimensions of corporate activities are very much in focus for shareowners and the asset managers they hire.

The SEC recently issues its interpretation of “climate risk” responsibilities for corporate issuers.  If the board and C-suite know or believe that there are specific material risks, concerns, and critical issues facing the corporation concerning climate change, these should be disclosed to shareowners.  Shareowners and their coalitions (such as the Investors Network on Climate Risk, and Ceres which manages INCR) are focused on climate change risk issues and were the drivers of repeated requests to the SEC to issue the guidance, which finally occurred this year.  Shareowner focus on attendant climate risk issues and corporate reporting (or non-reporting) on the issue will be very evident in this year’s [shareowner] proxy campaigns.

Then there is Say-on-Pay – the submission of executive compensation plans by the corporate board to shareowners for an advisory (non-binding) vote – a growing number of companies are now agreeing to do this and shareowners are demanding that more companies in portfolio consider adoption of this practice.

There has been a steady linkage of unacceptable behaviors (as seen by some shareowners and advocates) with actions on executive compensation, bringing traditional corporate governance issues (such as compensation) into intersections with civil and social issues of concern.  The financial performance of the issuer is [of course] of paramount importance, yes…but.  The “but” is that for a growing number of asset owners and managers, the policies, practices, behaviors and Key Performance Indicators (KPIs) on ESG issues (environmental, social and governance) is also very important, and for some owners, is a determinant of investment decision-making.  The issues involved get debated at proxy time.

And the primary arena in which contests of will between owner and board, owner and corporate management on ESG issues gets public attention is the annual proxy season.

Accountability Central editors present the news, commentary and research (publicly-issued) surrounding many of these contests in the proxy arena here for your information.  We’ve archived the 2008 and 2009 proxy seasons for your retrieval.  All years are searchable in A-C.  We invite your comments in the A-C – share your views with others interested in the corporate proxy season and the issues in the headlines.

The Editors



Latest on 2010 Proxy Season

December 22, 2010 Pension giant challenging Apple over corporate governance

Source: Apple Insider

The California Public Employees' Retirement System is seeking to change the policies of Apple and 57 other large companies that make up a portion of its nearly $200 billion U.S. portfolio. By lobbying for new rules requiring a...

December 21, 2010 Executive Comp: Say When

Source: CEO Magazine

CFOs' compensation packages will be exposed to shareholders' scrutiny next year, thanks to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which imposes mandatory advisory votes on publicly traded companies. But...

December 17, 2010 A new player in proxy season

Source: Just Means

In another proxy season for companies and shareholders, ITT Corp. this month held its annual meeting at its White Plains headquarters. Unlike past springs, though, the defense systems manufacturer’s voting was on the radar of a...

December 14, 2010 Four Large Cap Firms Express Views on Pay Vote Frequency

Source: RiskMetrics Group

Four S&P 500 companies have released their 2011 proxy statements with recommendations on the frequency of shareholder votes on executive compensation. Under the Dodd-Frank Act, companies are required to hold a “say on pay” vote...

December 9, 2010 Say on Pay: Will U.S. Shareholders Give Executives the Thumbs Up on Compensation?

Source: Knowledge@Wharton

Top corporate executives of U.S.-listed firms will have a new worry next year: Their pay packages will be scrutinized as never before. Starting in January, shareholders by law will be able to vote regularly to approve or...

December 7, 2010 Two Different Approaches to "Say When on Pay"

Source: Risk Metrics Group

The first U.S. proxy statements with a mandatory “say on pay” vote and a separate vote on the frequency of future votes were filed on Monday and provide an early look at how companies will address “say when on pay” votes during...

December 6, 2010 Shareholder activism - Ready, set, dough

Source: The Economist

FOR the past two years activist investors have been strangely quiet. The financial crisis slashed the value of their equity investments. Many scaled back or even closed shop. But there are signs that shareholder activists, who...

December 2, 2010 Dodd-Frank say-on-pay unlikely to have impact - CalPERS governance chief

Source: Responsible Investor

The head of corporate governance at the $220bn (€167.8bn) California Public Employees’ Retirement System (CalPERS) reckons the new advisory vote shareholders have on corporate pay under the Dodd–Frank act will have little...

December 1, 2010 Did new rules worsen pay situation?

Source: eFinancialNews

study prepared for an influential shareholder group says rule changes meant to revamp Wall Street's pay culture have been negative, concluding that pay practices at six US banks and securities firms have "worsened" since the...

December 1, 2010 Proxy Firms Need More Rules, Companies Say

Source: NY Times

A battle over whether to regulate proxy advisory services represents a political turn of the tables. Public companies and their advisers are pushing for new rules from the Securities and Exchange Commission to restrict proxy...

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