|
|
search | help | site map | contact us |
|
|
|
Issues Update — New York
|
|||||||||||||||||||||||||||||||||||||||||||||||
 |
 |
Emphasizing practicable knowledge-sharing, the Society is offering a full agenda for our Issues Update Seminar that includes such topics as:
Visit the Society's website, www.governanceprofessionals.org, for more information and to register online.
Dear Members:
THINK MEMBERSHIP!!
These two words welcomed each associate in the National Office when they logged on to their computers on Tuesday morning September 25, 2006.
While the theme for the National Office for the 2006 - 2007 year is "Building on the Basics," THINK MEMBERSHIP! will be our mantra. Along with this emphasis on membership growth and retention, we will devote serious attention to all member services especially educational programming.
Recent major objectives have been achieved at the Society, so it is time to focus again on the fundamentals. Let me review a few of these recent accomplishments: the name change; an added emphasis on members' governance experience and expertise; a reaching out to those involved in governance and compliance; and a review of the Society's own governance structure and practices with modest adjustments put into effect.
The 2005 - 2006 year concluded with an extremely successful National Conference which capped a year of outstanding educational activities and chapter programming using web casts and teleconferences to extend the reach and participation of chapter members. Our committees worked tirelessly to study and respond to new proposals and rulemaking from the SEC and reports and recommendations from the exchanges. New initiatives and measures sought by institutional investors and their advisors are subjects which matter to us. The news media's interest in executive compensation and perquisites, stock option grants and administration, conduct of annual meetings and corporate internal investigations command our attention.
With all that has been achieved and all that is happening around us, we must secure our influence and maintain our value by growing and improving. What better way to accomplish this than to "Build on the Basics," which have given us a 60 year record of success. Continued success is contingent upon membership growth and from this growth will come a renewed focus and enthusiasm, fresh initiatives and thinking, all of which will result in a more influential voice heard equally by our own members and other important constituencies.
At the National Office, we will be restructuring and re-assigning some roles and responsibilities. (The new roster of the National Office Chapter Representatives can be found here.) This will be energizing. Newly organized National Office "teams" will be proactive in initiating membership development ideas and new programming concepts. We know that our members have the willingness to serve but often are lacking the time and resources to act on their intentions. With this in mind, we will create a clearer delineation between National Office programs and responsibilities and "management" at the chapter and volunteer level.
Of one thing I am certain: A growing membership is a key ingredient to our success. Please join the National Office staff during the 2006-2007 year by "Building on the Basics", and remember:
THINK MEMBERSHIP!!
Sincerely Yours,
David W. Smith
President
Independence Hall in Philadelphia, where both the Declaration of Independence and the Constitution were signed. |
 |
 |
The Klopfenstein family celebrates Ben Franklin's 300th birthday at the Constitution Center. |
Jim Lootens confers with two of the signers of the Constitution at the Constitution Center. |
 |
 |
The Mallick Family in front of the Philadelphia Museum of Art for the Conference's Saturday Night Gala. |
 |
|
 |
David W. Smith, President of the Society, is presented with a gift to honor his 15 years of service by Chairman Bill Mostyn, Chairman-elect Lydia Beebe, and former chairs Kathy Gibson and Susan Ellen Wolf. |
Bestselling author and historian Michael Beschloss entertained and enlightened with tales of America's past presidents at the Conference Luncheon. |
 |
 |
Conference co-chairs Patty Wilkerson and Frank Zarb Jr. start the Conference. |
Above, Bob Lamm, Kathy Combs and Jim Brashear enjoy a coffee break between sessions. |
 |
 |
Broc Romanek leads a panel on the SEC's new comp disclosure rules with speakers Mark Borges, Pauline Candaux and Peggy Foran. |
By Stephen P. Norman
Stephen P. Norman is Secretary & Corporate Governance Officer of American Express Company. He is also a former Chairman of the Society as well as a graduate of Yale College and Penn Law. He is a member of the NYSE's Proxy Working Group.
For the Corporate Secretary, steering the Company's ship in today's climate of shareholder activism, the winds are howling and the rocks are jagged.
The looming perils include the recent high levels of votes withheld from directors, threats to the availability of the NYSE 10-Day Rule in uncontested director elections, and the majority-vote thresholds that many companies have recently adopted in the form of governance policies or by-laws.
For you the Corporate Secretary, the shipwreck occurs when you climb into your chair at the Annual Shareholders Meeting and your tabulator says you have fewer "for" votes than withheld votes for one or more of your directors, maybe even for your Chairman.
In these contentious times, both sides are focusing on the "uninstructed vote," the large block of street-name shareholders who, through apathy or indifference, fail to instruct their brokers how to vote their shares. These non-voters represent a significant percentage of each company's electorate. While institutions, mindful of their fiduciary obligations, tend to vote at the rate of 90% or more, as few as 40% of retail shareholders bother to vote. This uninstructed block represents between 10-20% of the outstanding shares of most companies, and can influence the outcome of director elections.
The New York Stock Exchange 2006 Proxy Working Group has recommended that the election of directors should no longer be considered a routine item and therefore should no longer be eligible to receive the broker 10-day vote. While the NYSE is not planning to implement this change until the 2008 proxy season, corporations would be well served to consider new methods to reach the non-voting segment of their shareholder base before the 10-day vote is lost.
Client Directed Voting
Client Directed Voting (CDV) is a new concept that will allow street-name shareholders to make their wishes known to their broker so that the broker or bank may vote their shares in a directed manner in those elections that the shareholder fails to provide instructions. It is a way of letting a shareholder tell his broker, "Look, if you don't hear from me in any given year, here's how I want you to vote my shares."
Under CDV, shareholders would make their elections at the time they sign their brokerage agreements. They would be afforded a number of choices in an even-handed manner to eliminate any perception of ‘stacking the deck' in favor of either management or dissidents.
Choices would include:
a) Vote as management recommends
b) Vote against management
c) Abstain on all matters
d) Vote in accordance with the brokerage firm's published voting policies
e) Vote proportionally with the firm's other clients' instructed votes on the same issue
The default position for clients who fail to specify a choice in their brokerage agreements would be e), proportionally as the broker's other clients have voted. In this manner, the shares are voted but neither management nor the dissidents receive an advantage when clients fail to give their broker instructions.
The precedent for making the CDV election in the brokerage agreement is found in the election that brokerage clients make to determine if they wish NOBO or OBO status. The NOBO/OBO election has been a standard feature of all brokerage agreements since the mid 1980's and has proven easy to administer. (In the NOBO/OBO election, the default position is to designate the client as a NOBO.)
Client Direct Voting should apply to all matters in the proxy statement, both routine and non-routine matters. To do otherwise would prevent its use in the election of directors if the NYSE declares the election of directors to be non-routine. The goal of CDV, after all, is to enable shareholders to have their wishes carried out on all matters up for vote, even when they neglect to provide instructions.
Client Directed Voting offers advantages to all sides:
a) to issuers who will be spared the expense of chasing the votes of the "can't-be-bothered" category
b) to brokers who will no longer face criticism for casting uninstructed votes in their discretion rather than the shareholder's discretion
c) to dissidents who will receive their fair share of the uninstructed vote for the first time.
Practical Considerations
Of course, a number of practical considerations will have to be faced before CDV can be implemented. First and foremost, any proposal to amend the standard brokerage agreement will require the support of the Securities Industry Association. To be sure, issuers will bear some expense for this effort. In addition, if issuers wish to request brokers to solicit existing clients to make their CDV elections to speed up the implementation of CDV, it will result in additional short term expense.
While Client Directed Voting is still in the concept stage, I feel it represents a great potential benefit to the Corporate Secretary and is worthy of corporate support. In my view, it offers a viable alternative to the loss of the 10-day vote and a path of calm water out of the proxy voting storms in which we presently sail.
Rule 452 — The Broker 10-Day Rule
|
The following is excerpted from a speech by Commissioner Campos to the SIA Operations Conference on May 12, 2006.
Late last year the Commission proposed amendments to the proxy rules that would allow issuers and other persons to furnish proxy materials to shareholders by posting them on an Internet website and providing shareholders with notice of the availability of the proxy materials. The proposed amendments are intended to lower the cost of proxy solicitations, which are ultimately borne by shareholders, by taking advantage of technological developments. Further, the proposed amendments also would apply to a soliciting person other than the issuer, which has the potential to reduce the costs of a proxy contest. Notably, under the proposed amendments, shareholders would be able to choose to affirmatively "opt out" of the Internet delivery regime and receive paper copies of the materials at no cost, but the default rule would be one of "notice and access."
I liked the idea of reducing the cost of soliciting proxies. However, I cautioned that we should take great care in ensuring that the proposed rules, if finalized, would not have unintended consequences. In addition, we've received numerous comment letters on the proposed rules, which raise a number of concerns about the proposed rules as they are currently drafted. Let me highlight a few of these.
A. Costs of Contested Proxy Solicitations
At least one commenter has presented data showing that only 5% of the costs associated with proxy contests are related to the printing and mailing of the proxy materials, meaning that 95% of the costs are associated with items such as fees paid to law firms, proxy solicitors, investment banks and public relations advisors. This same commenter asserted that, based on their analysis, not printing and mailing the proxy statement would have saved only an average of 1.7% of the total costs of a contested solicitation. If the results of this data are to be believed, it appears that the proposed rules would not be able to significantly reduce the costs of proxy contests.
B. Decreased Voting Levels
Another comment that we received is that - based upon survey data - investors would be less likely to vote via their proxy cards if the proposed rules were adopted. This result would be contrary to the goals of the proposed rules. Furthermore, it's been suggested that decreased levels of voting could make it more difficult for some companies to achieve a quorum at their shareholder meetings. This in turn might lead to higher costs for companies, as they might be required to hire proxy solicitors to generate enough votes to establish a quorum. Further, if enough companies were unable to reach a quorum, there could be gridlock during proxy season due to large numbers of companies having to routinely hire proxy solicitors.
C. Separating the Proxy Card from the Proxy Materials
As currently proposed, the rules would allow a company to include a proxy card with the mailed notice of availability of proxy materials, but would permit the company to post the proxy statement and annual report on its website. My concern about the separation of the proxy card from the rest of the proxy materials is that it might encourage shareholders to vote their proxies without reading the information in the proxy materials.
Not surprisingly, we have received many comments on the proposal, and more than a few commenters have shared my concern about separating the proxy ballot from the rest of the proxy materials. Moreover, at least two comment letters have pointed to separate shareholder surveys indicating that investors would, in fact, be less likely to look at annual reports and proxy materials under our proposals.
One option may be to prohibit companies from sending the proxy card with the notice, and instead to require the proxy card to be available only electronically with the rest of the proxy materials. In such a case, the shareholder could either print out the card and mail it in, or alternatively, simply vote electronically. I know that some have criticized each of these options: first, having shareholders print out the proxy adds a second step to the voting process; and second, there may be technological obstacles to overcome in administering electronic voting. But I'm confident that each of these issues can be addressed.
The Chapter Representatives at the National Office have been reorganized:
| Blanca Rosbach (212-681-2010) |
Middle Atlantic Ohio OKI Tri-State |
Oklahoma Pittsburgh St. Louis |
| Deborah Fox (212-681-2014) |
Dallas Houston |
New Orleans Southeastern |
| Ophelia King (212-681-2009) |
Eastern New England Fairfield-Westchester |
Hartford New York |
| Geoff Loftus (212-681-2004) |
Los Angeles Northern California Pacific Northwest |
Phoenix San Diego |
| Suzanne Walker (212-681-2008) |
Chicago Detroit Kansas City |
Milwaukee Rocky Mountain Twin Cities |
This committee met at the National Conference and will meet on December 1, on the day following the Society's Issues Update program. Work is proceeding on several reports and monographs:
Pauline Candaux has retired as chairman of the committee, and from her job at CIGNA as well, and is enjoying time with her husband, Sol. Neila Radin is the new chairman.
Stacey Geer submitted a comment letter to the SEC on the committee's behalf regarding File Number S7-11-06 - Concept Release Concerning Management's Reports on Internal Control Over Financial Reporting.
This committee will also meet on December 1 in New York.
The PCA subcommittee on corporate governance ratings services is reviewing the ISS 2007 Proxy Season Policy Review memo, which is soliciting comments on a number of possible changes in the ISS positions on several topics. Our group will be preparing and submitting a comment letter on behalf of the Society, and members are also encouraged to submit their own letters on behalf of individual issuers. The subcommittee is also very interested in the upcoming sale of ISS to a presently undetermined buyer.
PCA and its subcommittee will be holding meetings in New York on December 1.
The committee submitted a letter to the NYSE objecting to the proposed change in the broker non-vote rules. [The NYSE has since decided to hold off on implementing any rule change.] The objection was based on the belief that reform should not be undertaken in a piecemeal manner. The committee urged that the issues of share lending, with the resulting split between economic and voting interests be addressed.
Carol Hayes spoke on October 12 at the request of Charles Elson of the University of Delaware at the university on this topic along with Professor Henry Hu of the University of Texas who, together with Professor Bernard Black of the University of Texas have done the main academic work on the subject.
The committee meets by phone as needed.
The Society's new membership campaign with the New York Stock Exchange will be underway by the time you receive this newsletter. We've run similar programs with the NYSE in the past and had significant success with them, and we're looking forward to strengthening our relationship with the Exchange.
Ever since Sarbanes-Oxley, time and budget pressures may have left your staff without the resources to keep up with the new demands. Maybe you need a "Second Society Member" at your organization. As you know, the advantages and insights of Society membership are enormous. Wouldn't now be a good time to share this valuable resource with others on your staff? Wouldn't Society membership be of value for your colleagues on your corporate staff or at your subsidiaries, both foreign and domestic?
Additional members, in many cases, pay reduced annual dues. If you'd like to have your colleagues become members, please have them go to the Society's site and click on the "Join Us" link on the left side of any page.
They can start enjoying membership today!
The Corporate Secretary & Governance Professional is published quarterly throughout the year as a service to members of the Society of Corporate Secretaries and Governance Professionals. Articles or statements appearing herein do not constitute legal opinion, advice or judgment and should not be relied upon as such.
Inquiries regarding the content of this newsletter should be directed to Geoff Loftus: (212) 681-2000, gloftus@governanceprofessionals.org. Inquiries regarding membership or publication orders should be addressed to:
| Membership: Deborah Fox (212) 681-2014 |
Publications: Olga Holmes (212) 681-2015 |
Society of Corporate Secretaries and Governance Professionals
521 Fifth Avenue New York NY 10175
212-681-2000 - Fax 212-681-2005
membership
| search
| help
| site map
| contact us
Copyright & Privacy Statement
