Cambridge, Ontario-based Meritas Mutual Funds will again file "say on pay" proposals at Canada's top banks, fund officials recently disclosed. The decision to file for 2009 follows a successful campaign earlier this year when average support for the non-binding resolution amounted to 40.5 percent support at the country's five largest banks.

The fund is targeting eight issuers in 2009, including the five banks. They are: Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Nortel Networks, Royal Bank of Canada, Sun Life Financial, Toronto-Dominion Bank, and TSX Group -- operator of the Toronto Stock Exchange and Montreal Futures Exchange.

"Canada's largest issuers provide their shareholders with solid, and ever-improving, executive compensation disclosure, but no efficient and inclusive way to respond to the decisions that have been made by the board on their behalf," fund CEO Gary Hawton said in a statement. "If that disclosure was to ever bring a real problem into sharp focus, shareholders need to be able to do more than read about it. They need equal access to comment about it and the most efficient way to do so is through a vote."

None of the banks that faced the proposal this year agreed to allow for a vote, though each "indicated that it would monitor shareholder views on the matter," the fund noted in a press release. Bank of Montreal, for one, indicated it would make a "final recommendation to shareholders" on the matter in advance of its 2009 annual meeting.

Hawton predicts strong results in 2009, given support levels of 40 percent or more at some banks earlier this year. He is cautioning targeted companies against rejecting adoption of the proposal only to find investors give majority support to the resolution come the annual meeting.

Schering-Plough announced on Oct. 24, 2008 that it will conduct a shareholder survey on director and executive pay. The survey will be mailed to shareholders with the company's 2009 proxy materials, and results will be discussed in the CD&A section of the proxy statement for the 2010 annual shareholder meeting.

Schering-Plough says the survey is intended to "inform future work of the Compensation Committee and the Board" by providing a window into shareholders' views of the executive pay program.

"This survey is evidence of our commitment to seek and consider shareholder input, as we did in 2006 with the shareholder survey on majority voting for directors" said Pat Russo, Chair of the Nominating and Corporate Governance Committee of the Board, in the company's press release. Indeed, the company conducted a shareholder survey on governance issues after its 2006 annual meeting, which led to inclusion of two management proposals to amend the bylaws on the ballot for the 2007 meeting: one was to eliminate certain supermajority vote requirements, and the other was to elect directors by majority vote rather than plurality. The first proposal passed, but the second did not, although the board subsequently amended the bylaws to include a director resignation policy, triggered if a nominee in an uncontested election fails to receive support from a majority of votes cast.

It appears that the 2006 survey was conducted by an independent consultant rather than being mailed to shareholders with the proxy statement. For the executive pay survey, Rich Koppes, former General Counsel of the California Public Employees' Retirement System (CalPERS) and currently of counsel to Jones Day law firm and at Stanford Law School, will provide oversight of the process used to tabulate and report the results, according to the release. Koppes also will serve as the conduit for shareholders wishing to respond to the survey on a confidential basis.

Schering-Plough has participated in the Working Group exploring the issue of "say on pay" and presumably is hoping to head off annual votes, although the company did not indicate how often it intends to conduct its pay survey. A questionnaire should give the compensation committee more nuanced information than an up-or-down vote–and would take proxy advisors out of the equation--but with anger growing daily about extravagant pay practices in the troubled financial sector, Congress may still have advisory pay votes on its to-do list.

The SEC's Division of Corporation Finance has ruled against a "no action" petition by foods group Hain Celestial to bar from its proxy statement a shareholder proposal calling for the company to reincorporate to North Dakota.

So far, investors have filed North Dakota reincorporation proposals at Hain (which likely will hold a second 2008 annual meeting later this year), Oshkosh, and Whole Foods Markets. Hain is a Delaware-incorporated firm, while Oshkosh and Whole Foods are incorporated in Wisconsin and Texas, respectively.

The resolution, which proponents plan to file at more companies later this year, seeks to capitalize on July 2007 legislation requiring companies subject to the North Dakota Publicly Traded Corporations Act to provide for an advisory vote on pay, majority voting in director elections, and other shareholder-friendly measures. The law also mandates separation of the chairman and CEO positions, annual board elections, and the right of 5 percent shareholders owning stock for two years or more to nominate corporate directors, as well as another half-dozen or so measures to empower investors.

The proposal may fare well based on support given to other recent proposals to reincorporate to another jurisdiction for governance reasons. The United Brotherhood of Carpenters filed proposals at Ohio-based companies' 2007 annual meetings calling for their reincorporation to Delaware. At the time, Ohio law required companies to use a plurality voting standard in director elections, and the proposals eventually prompted state lawmakers to amend the law to allow for a majority vote standard in director elections. The proposal went to a vote at FirstEnergy, DPL, and Convergys, according to RiskMetrics records, where it received 34.9, 32.6, and 59.5 percent support, respectively.

Melville, New York-based Hain had sought to exclude the North Dakota reincorporation proposal on procedural grounds, arguing the proponent had failed to correctly satisfy minimum ownership requirements under SEC Rule 14a-8(b). Hain said a letter from the proponent's introducing broker-dealer confirming ownership failed to cure inadequacies in a proof-of-ownership letter initially provided by the filer's custodian. In rejecting the petition, however, SEC attorneys said that a written statement from an "introducing broker-dealer constitutes a written statement from the 'record' holder of securities," as required under federal proxy rules.

Late last year, proposals filed at Coca-Cola, Verizon Communications, and dozens of other corporations were omitted due to inadequate information provided by proponents' custodian banks. "Relying on a custodian has been problematic," activist investor John Chevedden told RiskMetrics. "We view the clarification offered in the Hain letter to be a success."

"There's been a tendency of late for companies to crack down on eligibility requirements," Cornish Hitchcock, an attorney for the Amalgamated Bank's LongView funds, noted in March after RiskMetrics analyzed omission data for the 2008 annual meeting season. The analysis found that roughly 30 percent of this year's resolutions had been omitted for failure to meet eligibility requirements, compared with 26 percent in 2007. According to Hitchcock, individual shareholders, retiree associations, and church groups have in particular seen an uptick in companies challenging their proposals on procedural grounds.

The Swedish government is fast-tracking a bailout package that could impact the executive and non-executive director compensation plans of the country's banks and financial institutions.

Under the proposal, participating banks would have to "restrict salary increases, bonuses, board fee increases, and executive severance payouts." While the restrictions would nominally expire at the end of the guarantee period on Dec. 31, 2009, it is as yet unclear whether the restrictions would in practice persist beyond this date.

The government plans to guarantee up to 1.5 trillion Swedish kronor ($205 billion) in borrowing by the banks. Sweden joins the United Kingdom, Germany, the Netherlands, and other European nations in taking action to shore up financial institutions. Also this week, France said it would spend 10.5 billion euros ($13.9 billion) to buy subordinated-debt securities from six major banks.

The guiding principle of the Swedish legislation would be for the brunt of any losses to be born by the financial institutions themselves and their shareholders, rather than taxpayers. Participation would be on an ostensibly voluntary basis, and participating institutions would be assessed a risk-based guarantee fee in the form of either cash or super-voting shares.

The proposed legislation, which has just cleared a comment period without major comment from Sweden's financial authorities, states that executive compensation restrictions are needed to mitigate the moral hazard inherent in the bailout package. The government asserts that variable compensation could namely exacerbate risk-seeking behavior arising from guaranteed investments. Indeed, the principle that banks not profit from any risks born by the Swedish taxpayer is a central component of the proposed legislation.

The reaction to the bailout package among the major Swedish banks has been mixed. While Swedbank welcomes the plan, Svenska Handelsbanken (SHB) believes itself stable enough to remain outside the framework. Financial Markets Minister Mats Odell has nevertheless stated that he expects all banks to participate eventually, and attributes all statements to the contrary to private individuals rather than the institutions themselves.

The political and media response to SHB's decision has been similarly mixed. Prime Minister Fredrik Reinfeldt has stated that participation should be purely voluntary, while both Finance Minister Anders Borg and Shadow Finance Minister Thomas Östros stress that all major banks should participate. Given that the program would lower the risk of the Swedish financial sector in general, Borg argues that anything less than full participation would allow some banks a free ride at the expense of others.

Beyond SHB, many banks have been lukewarm to the proposal, owing to the vagueness of the legislative text. The financial terms of the guarantee and credit fees, as well as the executive compensation restrictions, are as yet undefined and will be determined by the Swedish National Debt Office, which will administer the plan. The lack of interest has been reflected in the fact that the interbank loan rate reportedly fell less than expected following news of the bailout package.

Conversely, the government would formally have leeway to drop the executive pay restrictions entirely when negotiating with banks. Depending on the terms offered as well as the bargaining positions of the banks, executive pay considerations may be taken off the negotiating table. Time will tell, as negotiations will presumably begin immediately after the new legislation comes into force on Oct. 28. Top Swedish banking talent have in the past jumped ship as a result of pay cuts, meaning that the terms of the bailout package, as well as the final roster of participating institutions, could potentially impact the banks' leadership structures.

Conventional wisdom held that the global credit crisis would alter views on sovereign wealth funds (SWFs). Such investment was to be seen as less of a concern by many Western politicians, financial market participants, and others, who just six months ago loudly touted the need to curb such funding over perceived potential risks related to their lack of transparency and government ownership. Indeed, the global liquidity crisis has to some degree worked to mute the voice of those who opposed sovereign wealth fund investment in U.S. and European companies, as corporate issuers from New York to Zurich scramble for much-needed capital.

But events this week suggest sovereign investment from Middle Eastern, Asian, and other countries may still be viewed warily in Europe. In an Oct. 21 speech before the European Parliament, French President Nicolas Sarkozy warned that measures were needed to ensure that "European companies are not bought up by non-European capital while their stock exchange values are low…" He went on to call for the creation of sovereign wealth funds by each European Union country.

Meanwhile, Italy's center-right government said this week it may seek to cap sovereign wealth fund investments at 5 percent of individual Italian companies, the Financial Times reported. In seeking to promote investments that are "useful" while avoiding those that are "dangerous," Italian officials say they will gauge funds' compliance with recently released guidance on SWF investment.

The guidance, crafted by an International Monetary Fund-led working group of roughly two-dozen SWFs and dubbed the "Santiago Principles," calls on funds to describe and publicly disclose their investment policy, detail their governance framework and objectives, and to publicly disclose their "general approach to voting securities."

Mitigation of risks also is called for under the Santiago Principles. Funds should have a framework that identifies, assesses, and manages the risks of its operations. That in turn should include reliable information and timely reporting systems, which should "enable the adequate monitoring and management of relevant risks within acceptable parameters and levels, control and incentive mechanisms, codes of conduct, business continuity planning, and an independent audit function." The general approach to a risk management framework should be publicly disclosed, according to the principles.

The guidance, which is subject to home country regulations, has been or will be implemented by working group participants on a voluntary basis. SWF giant Abu Dhabi Investment Authority is one fund that has agreed to fully implement the guidance. Working group member countries include Saudi Arabia, Singapore, Russia, Qatar, Australia, and the United Arab Emirates.

Rising energy prices and looming climate regulation are already creating new risks for the real estate sector. Now growing public concern over global warming is creating new expectations for action. By improving energy efficiency, the commercial real estate market can meet these expectations and reduce exposure to climate and energy risk profitably.

On Thursday, October 23 at 2 p.m. EDT, RiskMetrics Group and EPA Energy Star, will host a joint webcast that examines how to reduce the carbon footprint of real estate holdings while increasing asset value and net operating income. Speakers for this webcast include: Nicholas Stolatis, Director of Strategic Initiatives Asset Management at TIAA-CREF Global Real Estate; Mike Kent, Managing Director at RREEF North America; and Walt Tunnessen, Energy Star National Program Director at the US EPA. Doug Cogan, Head of Climate Change Research at RiskMetrics Group, will moderate the discussion.

Registrants will receive an electronic copy of the article, Investors Commit to Improving the Energy Performance of Real Estate Portfolios, which is in the October edition of EPA's Off the Charts newsletter. To register for the webcast, please visit here.

Observers are still trying to figure out the likely effect of executive pay controls applicable to top executives of banks in which the U.S. Treasury takes minority stakes. So far, little is clear except that shareholders may bear the brunt of any impact.

Specifically, according to an Oct. 14 press release from the U.S. Treasury, the same compensation provisions stipulated under the Emergency Stabilization Act that authorized the government's $700 billion rescue plan--originally intended to fund the purchase of "troubled" bank assets-- will also apply to firms participating in the latest bailout scheme, the Capital Purchase Program (CPP). Under the CPP, the Treasury is providing equity capital directly to financial institutions, in order to boost their liquidity and prime the lending pump. Initial participants in the "voluntary" program (which required some arm twisting according to numerous press reports) include: Bank of America, Merrill Lynch, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, State Street, and Wells Fargo, with the government purchasing preferred share stakes ranging from $2 to $25 billion.

For as long as the Treasury holds CPP equity, the following will apply to "senior executives"--defined as the CEO, CFO, and next three highest paid executive officers--of each participating firm:

1) Incentive compensation for the senior executives may not "encourage unnecessary and excessive risks that threaten the value of the financial institution" – this is perhaps the most far-reaching of the provisions, but also the most ambiguous, as it does not define what constitutes such "risky" pay.

2) Any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains, or other criteria that are later proven to be materially inaccurate would be recovered – this confirms the policy that some shareholder activists have also been encouraging, i.e., "clawbacks" that do not require fraud or malfeasance but are intended to recoup performance-based awards that are not actually earned.

3) The financial institution is prohibited from making any golden parachute payment to a senior executive, to be based on the same tax code regulation providing that prohibition to firms participating in troubled asset sales – that is the same three-times-average-annual- W-2-compensation ceiling currently stipulated in the tax code, which is a fairly generous package (and only applicable in connection with a change in control under current regulations).

4) The company may not take tax deductions for executive compensation in excess of $500,000 for any senior executive – the bet (reported in the general press) is that companies will forgo tax deductions rather than lower pay, meaning that shareholders will foot this bill.

It's not entirely clear whether compensation (or parachutes) deferred until the government's stake is redeemed would be subject to the provisions, but the restrictions should at least encourage early repayment – score one for taxpayers. And the fact that these rules now apply to the nation's largest banks take the government's intrusion into executive pay matters to a new level – it's one that some activists may welcome, but the history of such attempts is littered with unintended consequences that have made them spectacularly ineffective.

Meanwhile, shareholder proposals requesting annual "say on pay" resolutions that would give stockowners more opportunity to express dissatisfaction with executive compensation practices continue to rack up significant votes. According to unofficial results, the proposal garnered 41.7 percent support (from votes cast) at Procter & Gamble's Oct. 14 meeting and 29 percent at Oracle Corp.– proponents estimate that the latter result would have been closer to 46 percent absent the votes from CEO Larry Ellison's 22.6 percent stake.

Last week's meeting of the Council of Institutional Investors (CII) in Chicago was punctuated by keynote addresses from two corporate leaders and panel discussions on how to preserve pension values in the face of the global credit crisis.

Brenda Barnes, CEO of Sara Lee, recounted her determination to focus on long-term value creation, based on a strategy that includes strong research and development investment, even as the stock price of the food products company has declined by 30 percent since she took the helm in 2005. In his turn at the podium, real estate tycoon Sam Zell predicted that "as long as Congress keeps hands off," the controversial $700 billion bailout will work, and the government will make money by providing a market for mortgage-related assets that will then attract other capital.

Anchoring a panel on "Rethinking the U.S. Regulatory Model," former chairmen of the Securities and Exchange Commission Richard Breeden and Harvey Pitt addressed the growing demand for more transparency around financial instrument transactions.

Much discussion focused on key causes of the crisis, which Pitt traced back to passage of the 1999 Gramm-Leach-Bliley Act. That allowed banks to offer investment, commercial banking, and insurance to foster competition in financial services, but Congress failed to update the regulatory framework, leaving "a 1900s regulatory system for a 21st century financial system," Pitt said.

Breeden noted that an important part of the market was not regulated at all, in that lenders were able to package and sell mortgage-backed securities to any party willing to buy -- "a small town in Norway," for example.

Breeden also underscored leverage as a major culprit. The Federal Reserve misjudged the "hyperleverage" being built into the system, he said, even though some firms were leveraged as much as 50- to 100-to-1. That can only be explained by avarice, he added. Lack of both internal and external transparency exacerbated the problem. Some firms didn't even know how much they were leveraged, and the government failed to require transparency that would inform the market.

Neither panelist offered a specific regulatory solution. At another session, "Examining the Futures & Options Markets," however, Craig Donohue, CEO of CME Group (the Chicago Mercantile Exchange) offered his firm, which each day clears millions of transactions involving highly sophisticated commodities-related instruments, as a good model for the financial sector. He further implied that the CME would be involved in securities auctions related to the recently approved bailout.

The former SEC chairmen agreed that a lack of alignment between executive pay and long-term performance also contributed to the financial crisis. Pitt cited John Thain at Merrill Lynch as a highly compensated chief executive who demonstrated that he had "no clue" about a key facet of the company's business, as he continually revised public statements about the extent of Merrill's mortgage-related write-downs--"$5 billion one day, to $7 billion, then to $11 billion." Boards must correlate and measure performance, and pay accordingly, Pitt urged.

Breeden mentioned bonus "claw backs" as one solution. H&R Block, where he ran an overwhelmingly successful proxy contest in 2007 and currently chairs the board, now has a policy that requires executives to return incentive pay if a restatement provides that the awards were not actually earned--regardless of whether the restatement involves misconduct. "In the financial world, you have bonuses paid today based on accrual earnings, whereas shareholders bear risk for a long time," Breeden observed. Pay systems should incentivize risk-taking, but they cannot just reward it without linking pay to performance, he emphasized.

Pitt's recommendation is more radical: Divide [senior executives'] compensation into two portions. One annual amount that is "enough to live on" and an additional sum that is put into an interest-bearing account and paid [at the end of the executive's career] based on the board's judgment of long-term performance. If the long-term portion is deemed not to have been earned, it "would be returned to shareholders."

RiskMetrics Group today announced the opening of its annual comment period for its 2009 proxy voting policies. A critical component of RiskMetrics' annual policy formulation process, the comment period allows institutional investors, corporate issuers, and governance constituents to provide feedback on RiskMetrics' policy updates while they are still in draft stage. The comment period runs through October 31 and includes RiskMetrics' U.S. and International policies.

RiskMetrics Group will release its final 2009 U.S. and International policy updates on November 20 and its Global Policy Summary and Concise Guidelines on December 18. To participate in RiskMetrics Group's comment period and learn more about its policy formulation process, please visit here.

RiskMetrics just released a new study, The Long and Short of It: Improving Short Selling Disclosure in the Hong Kong Special Administrative Region, examining short selling disclosure in Hong Kong. The study found that whilst the Hong Kong short selling regime is robust, disclosure can be improved.

In assessing short sales, the study called for a lower threshold at which they should be disclosed. Currently, short positions of greater than one percent are only subject to mandatory disclosure requirements when investors own more than five percent of a company. In addition, the report called for aggregate stock loan activity to be reported daily in order to provide more transparency around short selling, and for Hong Kong to work closely with China on short selling legislation as the mainland seeks to introduce a short selling regime.

The study also compared the short selling regime of Hong Kong with five key markets around the world. The findings revealed that disclosure requirements and short selling regulations are diverse. This diversity has been compounded by recent temporary measures that have been put in place with the aim of stabilizing markets around the world.

The study comes at a time when regulators globally are looking to act on short selling in their markets, with some placing temporary restrictions on short selling of some form. To access a copy of the report, please visit here.

RiskMetrics Group is pleased to announce the availability of its annual Postseason Report as well as a series of unique industry sector reports.

Some key takeaways from the Postseason Report include:

-Board declassification proposals received the greatest backing this year, averaging 67 percent support at 76 firms, up from 64 percent in 2007.

-Proposals calling for an independent board chair saw average support climb by more than five percentage points to nearly 30 percent of votes cast "for" and "against."

-While the global credit crisis resulted in fewer transactions this year, hedge funds and other activists continue to target underperforming companies, leading to another record year for U.S. proxy contests.

-While most directors were elected with broad support, investors have become increasingly willing to withhold support from board members in uncontested elections, even in the absence of a high-profile "vote no" campaign. In fact, directors at 82 S&P 500 companies received more than ten percent opposition this year, up from 64 firms in 2007 and 57 in 2006.

RiskMetrics Group makes available a broad package of postseason resource materials to assist both institutional investors and corporate issuers as they prepare for the upcoming season. To hear more on the trends from proxy season 2008 as well as what's ahead for 2009, RiskMetrics Group will host a governance webcast on Thursday, October 16 at 2 p.m. EDT. To register for this webcast, please visit here, where you can also download a copy of our 2008 Postseason Report and industry sector reports.

The ongoing market turmoil in the U.S. has sent shockwaves through global capital markets and is forcing European governments to act decisively to avert similar bank failures.

Last week, regulators stepped up efforts to shore up banking regulations as governments from Iceland to Germany moved to bail out troubled financial institutions. The most prominent rescue involved the Brussels- and Amsterdam-based banking giant Fortis, which over the weekend received a capital injection of €11.2 billion ($16.1 billion) from the Dutch, Belgian, and Luxembourg governments in exchange for a minority stake. That action was quickly followed by the British government's seizure of lender Bradford & Bingley and its roughly £50 billion ($90.12 billion) mortgage portfolio.

More recently, the Irish government announced Sept. 30 it would guarantee deposits and debts at six financial institutions, while the German government announced a day earlier it would join a consortium of banks in providing credit guarantees amounting to €35 billion ($52.2 billion) to Hypo Real Estate, one of Germany's largest lenders. Franco-Belgian bank Dexia also received a €6.4 billion government bailout this week.

This recent flurry of activity across Europe not only underscores the wide impact of global credit problems, but also highlights the lack of coordination in the European approach to the crisis.

The government of U.K. Prime Minister Gordon Brown warned about the Irish government's intervention. According to Brown, the deposit guarantee was capable of distorting competition given that the guarantees applied only to Irish, and not foreign, banks operating in the republic. Furthermore, the European Union Commissioner for Competition, Neelie Kroes, also cautioned governments about intervening and criticized Germany's rescue of WestLb, a German banking group that earlier this year received bailout money and was required to restructure.

For a decade, European regulators have worked to abolish national government support for local corporations in order to guarantee free competition across the EU. Currently, the European approach is primarily national and ad hoc, with European member states moving to save their own financial institutions. The recent events raise the question whether it is necessary to have a coordinated European approach. Suggestions for a pan-European fund to support the financial sector received opposition from Germany, but had initial support from the Netherlands, France, and other markets.

The potential impact of the credit crisis on European companies came into sharp focus following the U.S. government's takeover of mortgage giants Fannie Mae and Freddie Mac. After those seizures, European Internal Market Commissioner Charlie McCreevy told a gathering of governance professionals on Sept. 9 that more needed to be done to ensure effective governance, particularly with respect to transparency and risk management. It was also necessary for EU regulators to increase cooperation, he said, given that it is not enough to have a national focus when financial markets are integrated at the EU level and sometimes even globally.

The effect of an illiquid environment on Europe's financial sector could be worse than that evidenced in the U.S., some analysts contend. Economists at Citigroup warned in a report this week that European banks, with lower profits and interest margins than those in the U.S., have "less cushion to absorb financial strains and losses," Bloomberg News reported. That is pushing regulators and others in Brussels to strengthen oversight of the financial sector. On Oct. 1, McCreevy announced a draft proposal to give local regulators more authority over a lender's foreign operations.

The draft proposal seeks higher capital standards for the securities built out of loans or other assets, referred to as structured finance, which lie at the heart of the market turmoil. Lenders also would get stricter limits on the size of any individual risk they take on, even if it is from another bank. The proposal also seeks to tighten cooperation among regulators, with each multinational bank overseen by a college of authorities from every country where it does business.

McCreevy's proposal will now go to the European Parliament and the council of EU governments. Both policy-making bodies must agree on the package for it to become law, which at the earliest would be 2011. Notably, there is likely to be political resistance from smaller countries--especially in Eastern Europe--which fear they will play second-fiddle to regulators in larger financial markets. The proposal has received opposition from Germany, England, and the Netherlands.

Growing government involvement in the credit crisis may also have adverse effects for investors. Governments acquiring significant stakes in financial sector firms may demand veto rights over significant corporate undertakings including assets sales, acquisitions, and stock issues. Such rights may serve to weaken those of other shareholders by reintroducing control-enhancing mechanisms just as the EU steps up efforts to curb such instruments.

RiskMetrics Group hosted Nouriel Roubini of Roubini Global Economics, Barry Ritholts of Fusion IQ and Zach Gast of RiskMetrics Group in a discussion of the current credit crisis, the bailout and the likely ramifications for the markets yesterday.

Roubini provided a global perspective addressing the linkages of the economic weakness across the US, Europe and Asia. Ritholts put the recent market selloff in the context of other bear markets in equities. Gast addressed specific issues in the banking system from changes in mark to market accounting to deteriorating asset values to long term solvency.

This webcast was particularly popular given the current financial market crisis. In fact, the Wall Street Journal's Blog and another blog, Cash Mundy, are touching upon the key themes covered during yesterday's webcast.

To access the replay, please visit here.

Sections 132 and 133 of the Senate bailout bill approved last night would authorize the Securities and Exchange Commission to suspend and to study alternatives to "mark-to-market" or "fair value" accounting. The method of accounting--known formally as SFAS 157--effectively values an asset at its current, rather than purchase, price.

Critics of the practice blame valuations made under the decades-old rule for fueling the credit crisis by forcing financial institutions to value their assets at "fire-sale" prices. The SEC and the Financial Accounting Standards Board took steps on Sept. 30 to "clarify" the rules to give companies a greater say in how they value certain assets. The move was welcomed by banking interests that have also pushed for a loosening of mark-to-market accounting rules in the bailout legislation.

"More and more of our members in recent weeks have raised concerns that a number of accounting firms were mistakenly interpreting SFAS 157 in a way that required marking assets to fire sale values," American Bankers Association head Edward L. Yingling noted in a Sept. 30 statement. "This guidance will help auditors more accurately price assets that are difficult to value under current market conditions … [and better their] understanding of the accounting literature as they prepare third quarter reports,"

Advocates for investors and auditors oppose the change, arguing that any watering down of SFAS 157 would result in illusory accounts. The Center for Audit Quality, the Council of Institutional Investors, and the CFA Institute--which represents the nation's public company auditors, institutional investors and chartered financial analysts--said they oppose any suspension of SFAS 157.

"Suspending fair value accounting during these challenging economic times would deprive investors of critical financial information when it is needed most," the groups said in a joint statement on Oct. 1. "Investors have a right to know the current value of an investment, even if the investment is falling short of past or future expectations."

RiskMetrics Group, in coordination with the Sustainable Investment Research Analyst Network (SIRAN) and Walden Asset Management, today released the results from a second survey of Equal Employment Opportunity (EEO) disclosure among S&P 100 firms. A follow-up on a benchmark study from 2005, the second EEO survey suggests the disclosure rate among S&P 100 companies has diminished over the past two to three years.

The report finds companies that confirmed a policy to provide investors with comprehensive EEO-1 data, either in public reports or on request, decreased from 54 percent in 2005 to 36 percent of responding companies in 2007-8. While partial EEO data providers increased from 13 to 21 percent, those confirming that they do not disclose such information increased from 33 to 43 percent over the same period.

However, even these low reporting rates are likely overstated, as those electing not to participate–approximately half of S&P 100 companies–are assumed to be much less likely to disclose EEO information. Also, the companies surveyed are among the largest in the United States and have likely been under more scrutiny for their employment practices and pressure to disclose EEO-1 data than smaller firms.

There are several possible explanations for the precipitous fall in reporting rates. Shareholder pressure on this issue, in the form of resolutions filed during proxy season, has declined in recent years, as calls for broader global sustainability reporting–not aligned with U.S. EEO-disclosure requirements–have increased.

In addition, as of September 2007, the revised EEO-1 Report requires, among other changes, companies to separate the "Officials and Managers" job classification into two levels based on responsibility and influence, "Executive/Senior Level Officials and Managers" and "First/Mid-Level Officials and Managers." Therefore, given that employment disparities by race and gender tend to increase at higher management levels, companies may be more reluctant to share the EEO-1 Report.

You can access the full report by clicking here.