Directors Move From Failed Firms to New Board Spots

Gretchen Morgenson points out in the NYT that board members of companies that were damaged, and caused wider harm, in the subprime mortgage crisis haven’t been hurt themselves. Directors of failed banks and mortgage companies have moved on to serve on other corporate boards, including Sunoco Inc., Paccar Inc. and Tetra Tech Inc., she writes. Key passage:

… [I]t is hard to blame shareholders for wondering whose side directors are on, given the broad failures by many board members to recognize and rein in risk-taking at so many companies. As fiduciaries for the owners of the companies on whose boards they serve, directors have a duty to act in shareholders’ interests. After all, they are the shareholders’ representatives, and they are charged with ensuring that their companies are operated soundly and with long-term profitability in mind. Yet it doesn’t always seem to work out that way.

Morgenson mentions the steps the U.S. Securities and Exchange Commission is considering to make director elections more competitive, though she acknowledges critics regard the proposals as inadequate.

On2 Adjourns Meeting on Google, Solicits More Votes

On2 Technologies Inc., the video-compression software company, adjourned a special meeting on Google Inc.’s takeover bid, saying investors needed additional time to vote.

Most of the shares voted at the Dec. 18 meeting favored Google’s $106.5 million offer, On2 said in a statement. However, a merger vote requires a majority of shares outstanding rather than of shares voted, the company said. On2 suspended the meeting until Dec. 23 to provide more time to solicit proxies.

Matthew Frost, On2’s interim chief executive officer, said in the statement:

“Since a large number of On2’s stockholders have not yet voted, including many retail investors, we believe it is appropriate to adjourn the meeting and extend the voting deadline in order to give these investors a chance to vote.’’

Moxy Vote, the proxy-voting platform for individual investors, said on Dec. 16 that ballots representing 18.9 million On2 shares, or 11 percent of those outstanding, were cast through its Web site. Moxy Vote opened in November.

Google’s proposal has faced resistance from shareholders who said it was too low. Google offered 60 cents in its own stock for each share of On2.

Update: On2 has again adjourned the special meeting, this time until Feb. 17. The company set a new record date of Jan. 15. Investors who own stock on that date are eligible to vote at the meeting.

Google Bid for On2 Faces Shareholder Opposition

Google Inc.’s $106.5 million bid to take over video-compression software maker On2 Technologies Inc. has run into shareholder opposition and might fail in a vote next week, according to Seeking Alpha.

On2 investors would receive 60 cents in Google stock for each On2 share they own. The Internet search giant’s offer is considered too low by group of On2 shareholders. While three proxy advisory companies recommend voting for the transaction, “there is a good chance the deal won’t be approved by [On2] shareholders’’ on Dec. 18, Dan Rayburn writes.

Nell Minow feature in New Yorker

David Owen wrote a nice feature on Nell Minow in the New Yorker’s “Money Issue.” You can only read the abstract online, here. I think it does a really nice job of surveying the landscape of compensation reform and presenting Nell’s view, which is that compensation will be reined in when shareholders have more power to get rid of directors, call meetings, and shape company policies. Hear, hear.

ProxyDemocracy on SEC Investor Advisory Committee

The SEC is creating an Investor Advisory Committee “to give investors a greater voice in the Commission’s work,” and ProxyDemocracy gets a seat, through our director Mark Latham. As I’ve written previously, Mark’s ideas were a key inspiration for ProxyDemocracy in the beginning, and he’s been a great director since. I’m glad he’s going to be on the committee, both for him and for ProxyDemocracy.

The scope of the committee’s work, according to the press release, is

1. Advising the Commission on matters of concern to investors in the securities markets;
2. Providing the Commission with investors’ perspectives on current, non-enforcement, regulatory issues; and
3. Serving as a source of information and recommendations to the Commission regarding the Commission’s regulatory programs from the point of view of investors.

The other members come from a variety of organizations, including AARP, Charles Schwab, AFL-CIO, CII, and investment companies.

Let’s hope the committee is able to guide the SEC to give investors more of a constructive voice.

New Advance Discloser: CalSTRS

This week we added CalSTRS to our list of advance disclosers, bringing the total to 9. There are several reasons why this is a big deal. One is that CalSTRS is a respected institution, with a large portfolio (about $114 billion) and a good track record of engagement in corporate governance issues. (Some information about their policies is available here.) CalSTRS also is disclosing on a very broad portfolio of almost 4000 meetings a year, which means that their votes can guide shareholder-voters at a large number of companies. Finally, it’s a big deal because we’ve managed to do the disclosure directly, ie we get the votes straight from CalSTRS rather than from a website, which made it easier for CalSTRS to get going and could make things easier for us as well. Philip Larrieu and Anne Sheehan at CalSTRS are to be commended for making this happen.

Their press release is below.

CalSTRS Improves Proxy Vote Transparency

CalSTRS offers public access to all its proxy votes through online services.

SACRAMENTO, CA – The California State Teachers’ Retirement System (CalSTRS) announced today its most comprehensive, transparent disclosure of proxy votes ever.

The degree and convenience of disclosure this effort offers is unique among institutional investors. Using online postings, CalSTRS will make its votes known before the annual meetings of its more than 3,800 holdings in North America.

CalSTRS now makes its individual proxy votes publicly available online through a partnership with ProxyDemocracy, Inc. Additionally, CalSTRS is offering Broadridge Financial Solutions Inc. ProxyEdge subscribers access to all its proxy votes online. Last year CalSTRS cast more than 47,000 individual proxy votes.

“CalSTRS has called for greater transparency from its portfolio companies and we intend to lead the way with comprehensive disclosure of our votes,” said Anne Sheehan, CalSTRS director of corporate governance. “Information is vital for shareholders to make informed decisions about the companies they own and CalSTRS intends to let fellow shareholders, as well as management, know how we intend to vote.”

Like other large pension plans such as CalPERS and the Florida State Board of Administration, CalSTRS has, for years, announced its proxy-vote intentions on selective companies. The addition of online disclosure opens the process to all CalSTRS portfolio companies, allowing other shareholders to know how the pension fund will vote.

“Announcing our votes in advance will open the door to engagement with more of our companies. This discussion will bear fruit in better corporate governance practices,” Sheehan said.

Apart from posting upcoming votes, CalSTRS will archive its votes starting from 2007 on ProxyDemocracy.

ProxyDemocracy is a nonprofit organization that offers free online investor information about portfolio companies, their annual meetings and proxy ballots. Broadridge Financial Solutions, Inc. is a provider of technology-based outsourcing solutions to the financial services industry.

The California State Teachers’ Retirement System, with a $117.4 billion portfolio, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California’s 833,000 public school educators and their families from the state’s 1,400 school districts, county offices of education and community college districts.

Voting tool alpha

You may have noticed a new “Your shares” tab on the left side of proxydemocracy.org’s banner. We are slowly rolling out a voting service that is designed to make it easier for you to vote your shares responsibly.

We already publish the intended votes of a group of institutions whose voting policies may match your own principles. You can already look at these votes as a guide while you fill out your ballot on proxyvote.com or elsewhere. Our new system goes a step further by allowing you to view a ballot on ProxyDemocracy, see personalized recommendations (based on the advance disclosures we collect and your own voting preferences), and submit your vote right here on PD.

We’re still working out a lot of kinks, so the service for now is private. If you’d like to take part in testing, email info@proxydemocracy.org to get set up with an alpha tester’s password.

Chevron Meeting — Call for Proxies

I’m a bit late on this, but through Morgan Simon I got a notice from Amazon Watch asking for proxies for tomorrow’s Chevron meeting. I’ll attach the email below.

I expect it’s too late right now to help, but the interesting thing is the increasing ease of getting non-shareholders in the door to make the case on behalf of others. A few activists have suggested that ProxyDemocracy.org start helping with this, so we’re considering it (along with a lot of other initiatives). Let me know if you have any thoughts.

Amazon Watch is coordinating proxies for a large coalition of groups, representing communities on several different continents that have been negatively impacted by Chevron’s operations. We have speakers flying in from around the world to call on Chevron to improve its human rights and environmental commitments and live up to its talk of social responsibility. However, a handful of the proxies we were hoping to use to get these people into the meeting to speak have fallen through for various reasons. We would love your help at this late date if you can provide us with a proxy.

Specifically, we are looking for proxies for:

-Michelle Kinman, of the organization Crude Accountability, representing communities suffering pollution and human rights abuses from Chevron’s operations in Kazakhstan.

-Antonia Juhasz, author of The Tyranny of Oil and most recently the creator of an Alternative Chevron Annual Report, The True Cost of Chevron, which we will be presenting to the company and the media at the shareholder meeting to spotlight Chevron’s problematic operations around the world.

-Kenneth Jerome Davis, and Mayor Gayle McLaughlin, of Richmond, CA, where a proposed expansion to Chevron’s refinery poses a health and safety hazard to many neighboring residents, most of whom are working-class people of color.

The Chevron shareholder meeting is this Wednesday, May 27th. Thus, the situation is last-minute and urgent. The paperwork we would need from you is fairly simple – just 2 documents – but one of them requires contacting the brokerage firm or institution that manages your Chevron shares (if they are not held directly with the company), and you would have to do this first thing on Tuesday, and impress upon them the need to get you the required proxy form quickly (which they should be able to do).

If you will be able to help us with a proxy, please contact Daniel Herriges at daniel@amazonwatch.org , or by phone at 651-233-3034 (cell). (Copy Mitch Anderson at mitch@amazonwatch.org ) We can give you more detailed information about how to obtain and provide us the required forms to lend us your proxy.

Upcoming Bank of America meeting in LA Times

The LA Times ran a piece today about the upcoming meeting at Bank of America (here’s the meeting page on PD). As noted in the article, CtW Investment Group is leading a “vote no” campaign against CEO Kenneth Lewis, alleging that he showed poor judgment in the Countrywide and Merrill acquisitions and “transformed a bank well-positioned to weather the financial crisis into one of its most costly casualties” (according CtW executive director Bill Patterson).

The article gives airtime to both sides on the issue. I found it hard to tell from this whether BofA will indeed be in a strong market position coming out of the current crisis, and further whether that would have anything to do with Lewis’s leadership (and particularly these two decisions). These seem to be the important considerations for evaluating Lewis’s decisions and performance.

The big proxy advisers and institutions have not yet announced how they’re going to vote, which is why we don’t have any advanced disclosures from our sources on the meeting page. Sign up for BofA alerts if you want to be notified when we do find out how our sources plan to vote.

Proposal Details

Users have asked us to provide the text of shareholder proposals. (Up until now we’ve just provided a brief description, e.g. “Separate Chairman and CEO”.) We’ve now started doing this (providing not just the proposal text but also management’s statement and the names of the filers), and you can see an example for Monday’s meeting at Whole Foods. Right now only admin users can add this detail but ultimately we’d like to open it up and “crowdsource” a bit. Let me know what you think.