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Watch for Investor Populism in 2010

Middle-class managers and professionals could turn their anger against corporate executives in the upcoming proxy season, columnist Evan Cooper says. In an Investment News essay headlined “When the middle class gets angry, watch out,’’ Cooper writes:

Instead of throwing out their proxy-voting cards this spring, more investors may decide to vote against management proposals simply out of anger and frustration. … If corporate boards beholden to top management and timid institutions won’t rein in runaway CEO compensation, perhaps humiliation will work if it comes from Ma and Pa Investor.

January 4, 2010 at 4:10 pm Leave a comment

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.

December 29, 2009 at 5:07 pm Leave a comment

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.

December 21, 2009 at 11:28 am 1 comment

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.

December 11, 2009 at 4:31 pm Leave a comment

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.

October 8, 2009 at 5:30 pm Leave a comment

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.

June 4, 2009 at 4:41 pm 1 comment

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.

May 29, 2009 at 6:53 am 2 comments

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