Investors Push for Proposal Adoption
Submitted by: L. Reed Walton, Publications
With the 2008 U.S. proxy season approaching, shareholders are still pushing companies to adopt governance reforms that received majority support at meetings in 2007.
The Council of Institutional Investors (CII) is waging a letter campaign to urge firms to implement shareholder demands. The group, an organization of 130 public, labor, and corporate pension funds, originally sent letters in July to 99 companies where shareholder resolutions received more than 50 percent support from the votes cast “for” or “against.”
According to RiskMetrics Group data, more than 40 companies have made changes in response to majority-supported resolutions last year. At least 115 proposals won 50 percent shareholder support or greater in 2007, but that number may grow as companies with fourth-quarter meetings continue to report voting results.
In a new tactic, CII has actively followed up with companies that have not implemented investor-backed reforms since the initial round of letters, according to CII Deputy Director Amy Borrus. On Dec. 11, the investor group sent letters to 19 firms that had not responded to the initial letter in July, again urging them to adopt reforms--or at least set up a board committee to review the issue.
The CII also asked member investors to co-sign the correspondence. Fifteen public and private funds--including the AFL-CIO, the labor-affiliated Amalgamated Bank, and the public pension funds of Arkansas and Colorado--signed onto the December letters, though not all members signed each letter.
“We’re very pleased that so many of our members--both public [pension funds] and unions--have stepped up to the plate and signed on to these letters,” Borrus told Risk & Governance Weekly. “It’s very gratifying.”
One of the companies on the list, Allegheny Energy, announced Dec. 19--just over a week after the CII letter was sent--that it had adopted several reforms based on majority-supported proposals. According to regulatory filings, the company changed its bylaws to include a provision that shareholders owning 25 percent of outstanding stock may request a special meeting, and adopted a majority voting standard in uncontested board elections. A majority vote proposal by the United Brotherhood of Carpenters and Joiners of America won 50.2 percent support, and a special meetings proposal submitted by a retail shareholder received 57.2 percent support at Allegheny’s May meeting. The company also decided to create the post of “presiding director.”
Another company receiving a CII letter, home products company Fortune Brands, has failed to respond to majority-supported proposals to declassify its board of directors for two years. The measure received 68.2 percent support in 2007 and 66.8 percent in 2006, and members of the Rossi family have filed that proposal again this year. Fortune spokesman Clarkson Hine told R&GW that the company had no record of having received the Dec. 11 letter.
At Pulte Homes, a board declassification proposal received greater than 60 percent shareholder support in both 2006 and 2007. Regulatory filings at the home construction company do not indicate that a change to the classified board structure has been made. Pulte did not return calls for comment by press time. Other firms that received CII letters in December included papermaker Weyerhaeuser, where a proposal to eliminate supermajority requirements won over 60 percent support in 2006 and more than 70 percent support last year; and Sierra Pacific Resources, where there was 61.9 percent support for board declassification last year.
Additional CII Letters
On Jan. 30, the CII sent another batch of seven letters--this time to companies that had responded to the initial request in June, but had not followed up since. Among the companies receiving the letters were: AMR; Borg-Warner; Kimberly-Clark; Nicor; SunTrust Banks; and Vornado Realty Trust. The seventh company, FirstEnergy, is considering sponsoring a management proposal to eliminate supermajority vote requirements at its annual meeting on May 20, according to RiskMetrics data.
The CII held off sending letters to four firms--Centerpoint Energy, mall property operator Taubman Centers, power company PPL, and Honeywell International--because they indicated that they had plans to adopt majority-supported proposals, Borrus told R&GW. Honeywell told investors in December it would put forward a provision in 2008 to allow shareholders owning a 25 percent stake to call a special meeting, based on a 2007 majority-supported proposal by investors June Kreutzer and Cathy Snyder. Taubman is considering taking action on a Service Employees’ International Union declassification proposal as soon as this year, CII reported.
According to a Feb. 22 CII release, Kimberly-Clark and Nicor told the shareholder association they plan to sponsor management proposals on the issues that received majority support in 2007. A proposal asking for the elimination of supermajority provisions received over 80 percent support at Kimberly-Clark, while a similar measure received over 60 percent support at Nicor.
The same release told of an additional nine letters--sent Feb. 19--and co-signed by 11 member funds. The CII wrote that seven of the companies--CSX, CVS Caremark, Goodyear Tire & Rubber, HESS, Lowe’s, McGraw-Hill, and Yum! Brands--had responded to earlier letters with plans to address the majority-supported issues by the end of 2007, but “reviews of the companies’ SEC filings and other reports suggest that none of [them] have taken action.” Two more firms, Corning and Stanley Works, told the CII that their boards had decided against implementing the resolutions. The most recent letters to those companies urged them to reconsider those decisions, the CII wrote.
Other Companies Respond
Some firms not targeted by the CII have responded to majority-supported proposals from 2007. Morgan Stanley announced Jan. 22 that it had changed its bylaws to allow shareholders to amend bylaws with a majority vote, rather than the 80 percent previously required. More than 50 percent of Morgan Stanley shareholders voted for a resolution on this topic submitted by the Rossi family.
Sara Lee adopted a bylaw amendment Feb. 1 stating that shareholders will be allowed to make changes to those bylaws by way of a majority vote. The resolution received just over 80 percent support at the firm’s October annual meeting.
In of the most closely watched issues--the advisory vote on executive pay--Ingersoll-Rand pledged Dec. 18 to discuss the topic with its 25 largest shareholders, according to regulatory filings. At the company’s 2007 annual meeting, a majority of shareholders at the industrial supply company voted in favor of holding an annual investor vote on executive compensation.
Another firm that saw majority support for a “say on pay” proposal in 2007, Par Pharmaceuticals, has agreed to adopt the yearly advisory votes. Par’s Senior Director of Investor Relations and Corporate Affairs Allison Wey said that the first shareholder vote will be held in 2009. Verizon Communications also plans to hold its first advisory vote on pay in 2009 in response to a majority-supported shareholder proposal last year.
On Jan. 11, MeadWestvaco agreed to abandon its “poison pill” takeover defense, after a proposal by investor William Steiner received nearly 80 percent support in May.
A few firms have already responded to proposals filed for the 2008 proxy season. Houston-based cafeteria chain Luby’s plans to ask shareholders to vote to declassify the board at its 2009 annual meeting. Investors voted on a shareholder declassification proposal at this year’s Jan. 15 annual meeting. Luby’s has not yet released vote totals from the meeting, but the company's move to declassify was announced after the vote was held. A similar measure at the firm in 2007 earned 44.5 percent shareholder support.
Marsh & McLennan Companies has agreed to put forward a management proposal to declassify its three-tier board at its May 15 annual meeting. The Amalgamated Bank’s LongView fund withdrew a declassification proposal following the agreement, the company reported.
To view the firms which received CII letters urging proposal adoption, please Download file
Editor's Note: All vote percentages are calculated based on the votes cast "for" and "against" a resolution--not including abstentions or broker votes. This article provides examples and is not a complete list of U.S. companies that have made reforms in response to shareholder proposals.
| Permalink | Print Article | Back To Top |
TrackBack
TrackBack URL for this entry:
http://blog.riskmetrics.com/cgi-bin/mt-tb.cgi/1047