Governance Center Blog

Nov
30
2010

CII, ISS Arm Shareholders for 2011 Proxy Season

Armed with a new white paper from the Council of Institutional Investors and the recently released Institutional Shcii wall street pay coverareholder Services’ 2011 updates for its U.S. Corporate Governance Policy, shareholders seem well-equipped to tackle a myriad of executive compensation issues in the next proxy season.

The Nov. 30 CII paper, which was written by The Corporate Library’s Senior Research Associate Paul Hodgson, Advisory Services Manager Greg Ruel and Research Associate Michelle Lamb, concludes that while executive compensation packages among Wall Street firms has improved, banks are still not tying compensation to long-term performance. The report was meant to be a comparison of Wall Street firms to other large U.S. companies. The timing of the report was meant to help shareholders make decisions about advisory votes on executive compensation plans in the first year of the so-called Say on Pay rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Read the rest of this entry »

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Nov
23
2010

Report: Institutional Investors Owning More of Larger Companies

Institutional investors came back to the securities markets in droves in 2009 after fleeing during the financial crisis of 2007-2008, according to The 2010 Institutional Investment Report released by The Conference Board earlier this month. A tell-tale sign of the trend was the increased institutional ownership concentration in the 1,000 largest U.S. corporations.

As markets rallied in 2009, ownership concentration by institutional investors continued to expand in all but the 50 largest U.S. corporations, the 64-page report stated. Co-authored by Matteo Tonello, director of corporate governance research for The Conference Board, and Stephan Rabimov, an economist who has co-authored the report since 2004, the report showed that institutional investors owned 73 percent of the top 1,000 companies in 2009 compared to 69 percent in 2008. It is noteworthy that the bracket group consisting of the 50 largest companies in terms of market capitalization is the one for which institutional investors reported the only setback in 2009 (when average ownership concentration was reduced from 64.5 percent to 63.7 percent). Read the rest of this entry »

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Nov
19
2010

Worth Reading … SEC Comment Letters on Proxy Plumbing

When the SEC issued its concept release on the U.S. proxy system, also known as proxy plumbing, in July, it was praised by many corporate secretaries as a way to update the archaic process used to elect directors and vote on proxy proposals. It was also seen by some shareholders as a way to take the mystery out of the proxy voting process. But it was also seen as opportunity by those sitting in the C-suite and boardrooms to rein in the powerful proxy advisors.

Of the nearly 250 comment letters listed on the SEC Web site for the proxy plumbing release as of Nov. 16, (the comment deadline was Oct. 20) many focus on the following issues: Read the rest of this entry »

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Nov
18
2010

Frequency Becoming Focus of Say on Pay Battle

The battle over advisory Say on Pay votes at public companies, which will be in full force this spring, is coming down to frequency, rather than what’s in the plans themselves. In the last week alone, the topic has been hotly debated in a Governance Center Directors’ Institute Roundtable and a Conference Board Knowledge Series Webcast on new governance requirements.

Most likely, the reason for the focus on management say on pay (MSOP) frequency proposals was the Institutional Shareholder Services (ISS) release of its 2011 proxy voting policies for public comment late last month. The ISS, whose stature seems to grow as shareholders attempt to gain more access to proxies, issued its preliminary policies on Oct. 27 with an eye on publishing its final global policy summary and concise guidelines in late December. The ISS public comment period closed on Nov. 11. Read the rest of this entry »

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Nov
12
2010

Reports: Small Companies Like to Separate Chair/CEO While Big Firms Go for Lead Directors

While the big takeaway from the inaugural Korn/Ferry Market Cap 100 report on Board Leadership is that few public companies among the large capitalization public companies have non-executive chairs, it doesn’t mean there isn’t a trend towards the European practice. In fact, a recent survey conducted by The Conference Board in collaboration with the Society of Corporate Secretaries and Governance Professionals shows the practice is not so rare among companies with less than $5 billion in revenue.

One theory both studies seem to support is that the larger the company, the less likely it is to separate the Chair and CEO positions although those companies tend to have a lead or presiding director. Meanwhile, fewer smaller companies tend to have both a non-executive chair and a lead director. Read the rest of this entry »

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Nov
09
2010

Trade Association Contribution Disclosure at Heart of Investor/Company Post-Election Debate

The debate over how trade associations spend corporate political contributions continues to be at the center of the fight between trade associations and institutional investors even after last week’s midterm elections. A handful of institutional investors filed shareholder resolutions at several U.S. Chamber of Commerce member companies that challenge those company boards to review the policies and oversight of political expenditures specifically regarding trade associations.

Meanwhile, the U.S. Chamber released exit poll results from the Workforce Freedom Initiative that shows voters believe the expansion of labor unions, whose pension funds are among the biggest institutional investors, will negatively affect the economy. The results of the exit polls were released the day after the elections. Read the rest of this entry »

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Nov
08
2010

Could SEC Whistleblower Bounty Program Harm Internal Compliance?

Although nearly everyone — including the five SEC commissioners — agrees that corporate whistleblowers are the best source for detecting corporate fraud, there is trepidation about the proposed whistleblower bounty program under the Dodd-Frank Act. Many are concerned that the SEC program could undermine or bypass successful corporate compliance programs.

In fact, the SEC staff in its official proposed whistleblower rule released for comment last week addresses this issue:

“We emphasize, however, that our proposal not to require a whistleblower to utilize internal compliance processes does not mean that our receipt of a whistleblower complaint will lead to internal processes being bypassed. We expect that in appropriate cases, consistent with the public interest and our obligation to preserve the confidentiality of a whistleblower, our staff will, upon receiving a whistleblower complaint, contact a company, describe the nature of the allegations, and give the company an opportunity to investigate the matter and report back.” Read the rest of this entry »

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Nov
04
2010

Guest Contributor: Securities Class Action Filings Are Down, But Will The Trend Continue?

GUEST CONTRIBUTOR POST: Anthony Galban is senior vice president of Chubb & Son, and underwriting manager of directors and officers liability insurance for the Chubb Group of Insurance Companies. This post is exclusive to The Conference Board.

By Anthony Galban

Securities class action claims against publicly traded companies have been trending down in recent years. Way down. At the current rate, by year end the frequency of such claims will be down roughly 15 percent in 2010 on top of a nearly 25 percent decrease in 2009, according to the Securities Class Action Filings 2010 Mid-Year Assessment by Cornerstone Research done in conjunction with the Stanford Law School Securities Class Action Clearinghouse. [Read press release and report.] This trend has been a boon for those companies that purchase directors and officers liability insurance. The reduction in claims has attracted fresh capital which, in turn, has fostered a competitive insurance landscape. It certainly is a buyer’s market.

However, the underlying question remains: Why is claims activity going down at such a rapid rate?  Has the plaintiff’s bar gone on holiday? (Unlikely.)  Has corporate America rapidly reformed itself to the point of eliminating this much malfeasance?  (We can dream.) The answer is complicated and fraught with irony. Read the rest of this entry »

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Nov
03
2010

Dear CFO: SEC Warns of Foreclosure Disclosure Issues

It looks like public company directors don’t have to just heed my warning [See Oct. 20 blog post.]about addressing the possible fallout from the current foreclosure crisis. By now their management teams should have told them the SEC is gently reminding them of their obligation to disclose the risks and uncertainties their companies may have related to such securities.

A so-called Dear CFO letter last month wasn’t just sent out to the CFOs of banks, mortgage lenders and other financial services companies. In fact, the agency’s Division of Corporation Finance sent the letter to certain public companies as a “reminder of their disclosure obligations to consider in their upcoming 10-Qs and subsequent filings, in light of continued concerns about potential risks and costs associated with mortgage and foreclosure-related activities and exposures.” Read the rest of this entry »

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Nov
02
2010

Political Handbook: Political Engagement Programs Need to be Monitored

With the first national elections in the post Citizen’s United era all but over, The Conference Board Governance Center is looking ahead to the 2012 presidential election as it released the groundbreaking Handbook on Corporate Political Activity Monday.

Three key messages from the 52-page report [Read press release]:

  • Corporations need to look at their political engagement programs through an ERM filter, which requires board oversight.
  • Corporations need to monitor the political engagement and policy positions of the trade associations to which they belong.
  • Citizen’s United v. Federal Elections Commission decision (January 2010) has opened additional avenues to spending, and increased reputational and compliance risks.

The last message has been getting most of the attention from the traditional media during the midterm elections as an unprecedented amount of political contributions have come in for both Republicans and Democrats through such conduits as the U.S. Chamber of Commerce, the Business Roundtable, and various labor unions. Read the rest of this entry »

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