Number 1-97
February 1997

• SEC provides rules, guidelines for using "plain English"
• From the Chairman
• Automation Seminar: Take a look into the future now
• Cuomo, Trillin, Wallman to address 1997 Conference
• Tapping research resources at the National Office
• Commission focuses on derivatives, EDGAR, odd-lots
• Membership recruitment continues at strong pace
• Society Notes
• Member discount now available from Bridgeway
• Commentary - Proxy Voting and Corporate Governance -- For What?
• Promotions and New Positions
• Society teleconferences put experts "on-the-line"

SEC provides rules, guidelines for using "plain English"

[The proposals are set forth in Release Nos. 33-7380, 34-38164, which is available on the Commission website. Members can also request copies from Blanca Rosbach in the National Office at 212-681-2010.]

In conjunction with the release, the Commission also issued the draft of "A Plain English Handbook: How to Create Clear SEC Disclosure Documents," a guidebook compiled by its Office of Investor Education and Assistance. That office is headed up by staff member Nancy Smith, who has presented programs on plain English at several national and local Society programs in the past six months and co-authored an article in the September 1996 newsletter discussing plain English principles and enlisting Society members for an SEC pilot program on plain English. Several Society members have served as pioneers in the program.

The handbook provides specific tips and techniques for improving the language and presentation of disclosure documents. Members can request copies by calling 1-800-SEC-0330 or can access the document on the Commission's Internet website (http://www.sec.gov). The Society has provided a shortcut to accessing the document from the "What's New?" and "Internet Sites of Interest" headings on our homepage located at http://www.ascs.org. That latter area of the Society website provides direct links to a wide range of useful Internet sites where members can obtain legal, financial and business information.

In the proposing release, the Commission notes that many current prospectuses contain dense writing, legal boilerplate and repetitive disclosures. The information is also often presented in pages overpacked with words and typefaces that are hard to read. These problems are magnified by the complex transactions and novel securities that dominate today's securities market. As a result, many investors skim, rather than read, the documents.

The proposed rules would attempt to improve the readability and clarity of prospectuses by requiring public companies to write the information "in everyday language that investors can understand on the first reading," particularly in the front part of prospectuses -- the cover page, summary, and risk factors sections of the documents. The proposals also call for moving to the body of the document technical information that may be required in the offering process, but is not critical for the cover page. In addition, revisions are proposed to Rule 421, the rule of the preparation of prospectuses, to give companies guidance on how to improve the readability of the rest of the document.

The release sets forth, and illustrates in "before-and-after" examples, a number of plain English principles that companies would be expected to employ in their prospectus writing. Among these are: active voice; short sentences; definite, concrete, "everyday" words; tabular presentation or bulleted lists for complex material; no business or legal jargon; and no multiple negatives. An example of the last item is: "No clause can become valid unless approved by both parties." (Improved: "A clause becomes valid only if both parties approve it.")

The Commission also discusses several design principles that companies should use to make their documents easier and more inviting to read. These include: using shorter lines of text or presenting information in two columns; trying to provide more white space around text; avoiding text in all capital letters or with justified right margins; including a table of contents, when practicable; including a glossary, if necessary, to help investors better understand key terms; and using a "question-and-answer" format to answer common questions raised by investors. The Commission further recommends using personal pronouns in the text, such as "we" in referring to the company and "you" in referring to the investors. (These personal pronouns are even used in the language of the release itself to illustrate the point.) The release notes that while several companies that have taken part in the plain English pilot have used personal pronouns throughout their documents, others have employed a modified approach in which they used personal pronouns to refer to the company and a more formal designation, such as "holder" or "noteholder," to refer to the investor.

Special recognition is given in the release to documents developed by three Society members who participated in the pilot program: a universal shelf offering registration filed by Margaret Foran at ITT Corporation; a prospectus for medium-term notes prepared by Susan Wolf at Baltimore Gas and Electric Company; and a joint proxy statement prepared for the proposed merger of Bell Atlantic Corporation and NYNEX Corporation by Kathleen Gibson. All three documents are appended to the release in before-and-after form. The three Society members have had high praise for the advice and cooperation they have received from the SEC staff in preparing their documents and noted that the expedited review given the documents was very helpful to their companies.

Near the end of the release, the Commission has included a phase-in schedule for any plain English rule that is adopted. According to the schedule:

• Registration statements pending on the effective date of the rule would not need to be revised to meet the plain English requirements;
• An updating amendment to a registration statement filed to meet Section 10(a)(3) of the Securities Act would be required to comply with the rule in effect at the time of filing;
• Any shelf registration statement affected by the plain English rule would be required to comply with the requirement at the time a new shelf registration statement is filed, but no later than December 31, 1998; and
• All filings would be required to comply with the rule no later than December 31, 1998.

A subcommittee made up of members of the Society's Securities Law and Corporate Practices Committees is in the process of preparing a comment letter to the Commission on the proposed rules. Copies of the letter will be available from the National Office and via the Society's Fax-on-Demand system as soon as it is submitted. The deadline for comments to the Commission is March 24, 1997.

FROM THE CHAIRMAN

The Special Value of Society National Committees

During the past year, my position as Chairman of the Society has given me the opportunity to attend meetings of many of the national committees, where I find the same unique creative process occurring. The coming together of a group of dedicated corporate secretaries results in two distinct benefits: First, these committees work on projects that have a direct benefit to membership and the companies we represent. Of equal importance, I believe, is the open exchange of ideas among those at a meeting to help fellow members get things done in new and better ways and the opportunity for networking to exchange ideas after the meeting.

The truly unique aspect of our organization is the mix of people you will find working together, at the chapter level and on each of our national committees. Titles and the status of the corporate employer are disregarded. Seasoned professionals work along side members just starting on their careers. Anyone who is willing to contribute can join a committee and within weeks be working on a key project of immense importance to the organization. Any Society member who has served on a national committee has probably come to the same conclusions. I know that being on the Corporate Practices Committee has helped me do my job more effectively over the years, and I'm glad that I joined the group not too long after I joined the Society.

The Society's board of directors is currently reviewing the Society's committee structure, with an eye to strengthening the mission of the national organization to support our members in their efforts to achieve professional objectives and personal goals. Among the ideas under consideration is the expansion of the Automation Subcommittee of our Education Committee into a full committee on Technology. Everyone is planning for the year 2000 these days, and a Society Technology Committee can help members prepare for the new millennium. It can also assist the National Office in its efforts to employ technological advances to get information to members more quickly and efficiently.

The board is so interested in looking at the national committee structure and activities because we realize the key role that the committees play in the Society's efforts to analyze job related issues and to convey information through publications, comment letters, seminars and other media. I urge you to get involved in the work of one of the Society's national committees. You will soon be receiving an invitation from Society President David Smith to join a national committee. Please look over the descriptions of each committee carefully and determine which one best meets your interests and needs. Yes, committee work requires a commitment of time and energy, but the networking opportunities and the value of the work you will be doing more than balance the scales. Ask any committee member; the testimonial will convince you to join us.

Automation Seminar: Take a look into the future now

Seminar sessions have been designed to provide practical information for both experienced and novice computer users. Special emphasis is being placed on how corporate secretaries are using the Internet for various tasks from communicating with shareholders and employees to broadcasting the annual meeting on-line. Other panels and breakouts will focus on how companies are automating their records management function and how secretaries are using computers to help them prepare and index minutes, keep track of company, director and subsidiary records, and conduct stock transfers electronically. The seminar will also feature an exhibit hall with vendors who provide automation products and services for corporate secretaries.

For information about the seminar program or registration, contact Harriet Chabrowe at (212) 681-2009.

Cuomo, Trillin, Wallman to address 1997 Conference

New York Governor Mario Cuomo, satirist Calvin Trillin and SEC Commissioner Steven Wallman will add value to the Society's 51st National Conference when they address participants at this year's annual meeting. The conference is scheduled at the Westin Hotel-Copley Place in Boston, July 9-13. Other notable speakers and panelists will include Olena Berg from the Department of Labor, who has also written an article included in this newsletter issue, and Brian Lane, Director of the SEC's Division of Corporation Finance, who will provide an update on current Commission initiatives.

The theme of the conference is "The Corporate Secretary: Adding Value," and business program sessions will focus on providing information to help corporate secretaries in their unique role as value-adding advisors to company management, directors and shareholders in such areas as governance, regulatory compliance and corporate administration.

[Members should look for a mailing soon that will include hotel and airline information as well as details on pre- and post-conference tours in New England and nearby areas. Conference registration packets will be mailed out in April with full details on the business and social programs planned in Boston. Please note that this year's conference is being held later than in most previous years. The later date will enable some members whose boards meet in the fourth week of June to attend and may also fit better into family vacation schedules.]

Cuomo, who served three terms as New York Governor from 1982 to 1994, will deliver the Conference Opening Address on Thursday morning, July 10. He is noted as a progressive political executive and fiery speaker whose keynote address at the 1984 Democratic National Convention helped galvanize the event and influence the party's platform development. Cuomo currently serves as a partner in the New York law firm of Willkie, Farr and Gallagher, while he continues to pursue wide-ranging interests in public policy.

Trillin will deliver the Annual Luncheon Address later on Thursday. His columns regularly appear in The New Yorker and in newspapers around the country and his satiric books on topics ranging from pleasurable eating to life in the 1950s are regular best sellers. He has been called "a classic American humorist." Trillin combines an Ivy League wit with a midwestern viewpoint, which helps explain his unique outlook on the American scene.

Wallman, who has addressed several previous Society conferences and seminars, always adds thoughtful insights and dynamic energy. He has been particularly active recently in trying to forge a compromise solution to shareholder proposal reform, as well as a number of other key Commission projects.

The National Conference Committee under the leadership of Nicholas Calise of The B.F. Goodrich Company has also planned an outstanding social program that takes advantage of many of Boston's historical and cultural sites, plus a few other locations chosen just because they are fun. One fun place -- the Water Works in Boston harbor -- will be the site of a family evening reception and clambake on Thursday night. Adults and children will have a great time eating, listening to music and playing a variety of games in the waterfront area.

Calise notes that the Committee is exploring something different for the Saturday night reception and Final Banquet, but he wants to keep that a mystery until plans are finalized.

Information about the conference will be posted on the Society's Internet website as soon as it is available. Members will also be able to link from the Society homepage directly to the Westin's website to make hotel reservations for the conference dates. Please note that, as in previous years, Conference participants, who want to arrive in Boston early, will be able to enroll in a one-day "mini-Essentials" seminar or a personal development workshop during the day on Wednesday. Both programs will be free for registrants.

Boston's skyline rises majestically above the Charles River. Boston is a great place for a tranquil sail, a stroll through historic landmarks and outstanding museums, or a Society national Conference. Make plans to be there, July 9-13.

Here are two views of historic Boston that members will be able to share during the National Conference, July 9-13. Below is the Old Corner Bookstore, built in 1712, which housed the literary center of Boston in the 1800s. To the right is a cobblestone street lined by townhouses in Boston's historic Beacon Hill area.

Tapping Research Resources at the National Office

• Could you give me some idea of what other companies' blackout periods and trading windows are re: insider trading policies?
• Where can I obtain surveys or other information relevant to board compensation practices?
• Can you send us examples of management statements in opposition to proposals to eliminate staggered boards?
• Does the Society have any information on the average size of boards of directors for companies of our size?
• Could you send us samples of "safe harbor" language that different companies have adopted?

The questions cover a wide range of issues, but they have two things in common: Each one is very important to the person asking the question, and each one needs to be answered as quickly as possible.

Blanca has been with the National Office for over 27 years and Olga is our newest staff member, but together they are an ideal team to help you locate information you need. They use the various research tools available in the National Office or reach out to a member expert or a relevant outside source to find the answers. And a response is almost always made to the questioner within 24 hours.

What tools are available?

Core Document Files

With the Core Document Files at their disposal, members don't have to "reinvent the wheel" or seek costly outside help when they need to prepare documents for their own companies. Instead, they can rely on the collective experience of other Society members.

[A Core Document Files Checklist is enclosed with this newsletter. Members can use the checklist to indicate specific topics for which they would like sample documents. The materials will be sent out by mail or fax, depending upon the member's request. The National Office charges a photocopying fee of 40 cents/page for materials returned by mail and $1.00/page for materials sent out by fax.]

Proxy Statements and Annual Reports

Society Surveys

Other Reference Materials

You

Personalized research is one of the most important benefits of Society membership, yet many members don't know just what they can find out by contacting the National Office. The National Office staff has begun surveying new members who have belonged to the Society for less than a year to ask for their impressions of the organization and its member services. Nearly every respondent has had an opinion about the newsletter, publications, and flash faxes, but the three least tapped services are all related to the Society's specialized information resources -- research services, fax-on-demand and Internet website information.

Here's a quick test. How would you answer each of the following questions?

1. Have I called the National Office on any topic during the previous year before calling my outside counsel?
2. Can I request a report from the National Office on the average compensation for an assistant secretary without a law degree in my particular industry and geographical area?
3. Is Blanca Rosbach's direct number at the National Office (212) 681-2010?
4. Did I know before reading this article that the National Office maintained extensive files of corporate policy statements and communications?
5. Have I ever used the Core Document Files Checklist to order materials from the National Office?
6. Have I visited the Society's Internet website to see what information is posted there or used a link from the Society page to other websites (such as the SEC, the Wall Street Journal or various legal and financial reference sources)?
7. Have I signed up for the Society's Fax-on-Demand system that enables me to request documents 24 hours a day and receive the materials at a discounted cost?
8. Have I provided my e-mail address to the National Office to help me network with other members electronically? (The Society has recently mailed a directory of members' e-mail addresses on record at the National Office, and plans to include e-mail addresses in the next Members Year Book. Please convey your address to the National Office by sending a message to rbenasar@governanceprofessionals.org.)

If you answered "No" to any of these questions, then you are not tapping all of the resources available to you as a Society member.

Commission focuses on derivatives, EDGAR, odd-lots

The derivatives rules, set forth in Release Nos. 33-7386, 34-38223, will require companies to expand disclosure of derivative accounting policies in the footnotes to financial statements and to provide outside of financial statements new "quantitative and qualitative" disclosure on the market risks inherent in derivatives or other financial instruments they hold. The new rules also remind registrants to supplement their existing disclosures about financial instruments, commodity positions, firm commitments and other anticipated transactions with related disclosures about derivatives.

For banks, thrifts, or companies with a market cap of more than $2.5 billion, the rules become effective for filings that include annual financial statements for periods ending after June 15, 1997. For other registrants, the effectiveness date is one year later.

EDGAR updated

A proposed new Rule 13 of Regulation S-T would allow issuers to electronically file proxy materials with the SEC promptly on the next business day following distribution to security holders where it is impracticable to file on the same business day on which the distribution first occurs. This rule would enable West Coast filers to file timely after the 5:30 p.m. (Eastern time) closing of the Commission offices or enable mailings to be made on a weekend of holiday and the filings to follow. A proposed new Rule 14 would establish a new Form DF ("Delayed Filing") that would be used when an issuer attempts in good faith to file an Exchange Act report or schedule but is unable to do so because of "unanticipated technical difficulties beyond the filer's control." The report or schedule would still be timely if filed within two business days following the applicable due date and if a Form DF was filed no later than the date the report or schedule is filed.

The EDGAR release also asks for comment regarding expansion of the current system to permit electronic filing of no-action and interpretive requests, filings made in connection with exempt offerings, and Section 16 reporting forms.

The Society's Securities Law Committee is preparing comments on the EDGAR proposals.

Odd-lot tender offers amendment

Membership recruitment continues at strong pace

In the last issue of the newsletter, names and companies of approximately 200 members were listed. Below are an additional 97 new members who have joined between December 1, 1996 and January 31, 1997. The new members are listed below by company. Please extend them a warm welcome. Are there some companies in your industry group or local area not yet represented in the Society membership? The Society needs your help in contacting potential members in those companies. Contact the National Office (212-681-2014) for membership materials and information.

Advanced Lighting Technologies, Inc. - Julie Byrne
Allegheny Power System, Inc. - Carole R. Chamberlain
Alliance Data Systems - Carolyn S. Melvin
AMBAC Indemnity Corporation - Kevin P. Dolan
American Brands, Inc. - Mark S. Lyon
American Express Company - Douglas H. Daniels, Michael Kuchs
American Home Products Corporation - Eileen M. Lach
ARCO Chemical Company - Kathy H. Gaddes
Arden Group, Inc. - Patricia S. Betance
Auspex Systems, Inc. - Fred Nervo
Avenor, Inc. - Jacques Beauchamp
Bacou USA, Inc. - Philip B. Barr
Barnes Group Inc. - Charles E. Lindsey
Bell Communications Research, Inc. - Norma J. Messing
BI Incorporated - Sandy Lozinski
C T Corporation System - Randall T. Harms, George C. Romero
CareAdvantage, Inc. - Richard J. Strobel
Case Corporation - Linda M. Smith
Centimark Corporation - Patricia L. Hays
Citizens Banking Corp. - Edward H. Newman
Citizens Utilities Company - Karen K. Pederson
Command Financial Press Corporation - Stephen P. Penders
Compaq Computer Corporation - J. David Cabello
Corporate Investor Communications, Inc. - Paul M. Hebert
Dell Computer Corporation - Leslie L. Houghton
The Dial Corporation - Lucinda Kay Stewart
Donna Karan International Inc. - David L. Bressman, Lynn E. Usdan
Enron Global Power & Pipelines L.L.C. - Norma A. Tidrow
Experian Information Solutions - Thomas A. Gasparini
Ferro Corporation - Leonard D. Young
The Furst Group, Inc. - Suzanne M. Brinn
General Magic, Inc. - Mary E. Doyle
GPU, Inc. - Sharon K. Cepeda
Greenwich Air Services, Inc. - Michael A. Bucci
Harley-Davidson, Inc. - Catherine Simmons-Gill
Health Cor Holdings, Inc. - Stephen L. Cohen
Hertzog, Calamari & Gleason - Angelo P. Lopresti
Host Marriott Corporation - Anna Mary Coburn
IBJ Schroder Bank & Trust Company - Steven J. Wright
IFusion Com Corporation - Burt H. Liebman
Institute Associates, Inc. - Gerald A. Simon
Integra Med America, Inc. - Claude E. White
Intel Corporation - Cary I. Klafter
IPL Energy (U.S.A.) Inc. - Susan D. Lenczewski
J.P. Morgan & Co. Incorporated - Gene A. Capello
Landis & Gyr Holdings, Inc. - Walter W. Winkel
Linens 'n Things, Inc. - Brian D. Silva, Denise Tolles
Liz Claiborne, Inc. - Roberta Schuhalter Karp
London Life Insurance Company - Lorna J. Askes
MasterCard International - Robert E. Norton
Metris Companies Inc. - Katrina Ganz
Milwaukee Land Company - Thomas F. Redler
Minerals Technologies Inc. - Christopher Dee
Monsanto Company - Karen L. Knopf
Morrison Fresh Cooking, Inc. - Mitchell S. Block
Murphy Oil Corporation - Walter K. Compton
National Scientific Corporation - Natalie Hill
Neose Technologies, Inc. - A. Brian Davis
Nevada Power Company - Richard L. Hinckley
Northern Trust Corporation - Rose A. Ellis
OccuSystems, Inc. - Richard A. Parr
Oglethorpe Power Corporation - Patty Nash
Olin Corporation - L. Jennifer Wolbach
Pacific Telesis Group - Mara Elizabeth Seaton
Pemco Corporation - Denice Town
Penwest, Ltd. - Edmund O. Belsheim
Peoples Telephone Company, Inc. - Francis J. Harkins
Pete's Brewing Company - Jeffrey A. Atkins
Ply Gem Industries, Inc. - Charles M. Modlin
The PMI Group, Inc. - Victor J. Bacigalupi
Prime Retail, L.P. - C. Alan Schroeder
Ranpak Corp. - James J. Corbett
Reed Smith Shaw & McClay - Edward Hoopes
S3, Incorporated - Sandy O'Halloran
Schweitzer-Mauduit International, Inc. - William J. Sharkey
Software 2000, Inc. - Anne Marie Monk
Star Banc Corporation - Jane A. Ludwig
Telemundo Group, Inc. - Osvaldo F. Torres
Textron Inc. - Frederick K. Butler
Tower Properties Company - Chester A. Wittwer
Travelers Group Inc. - Stephanie B. Mudick
U S WEST, Inc. - Glenda M. Hijar, Sean C. Lindsay
ULLICO Inc. - Dallison R. Brock
United Healthcare Corporation - David J. Lubben
United Technologies Corporation - Charles F. Hildebrand
Urban Outfitters, Inc. - Jay M. Hammer
US #1 Industries - Richard R. Courtney
USTN Holdings, Inc. - Daniel E. Weiss
Vanguard Airlines, Inc. - Brian S. Gillman
VICO Services, Inc. - Martha G. Braddy
ViroPharma Incorporated - Thomas F. Doyle
WavePhore, Inc. - Douglas J. Reich

Society Notes

Make your views known on shareholder proposal reform

"Everything is on the table," commented SEC Chairman Arthur Levitt. "We are looking for new ideas, including those that could fundamentally change the way we administer the shareholder proposal process."

The detailed questionnaire presents a series of separate questions to companies and shareholders and then asks all respondents to comment on questions that focus on specific suggestions for reforming the shareholder proposal rules. The company questions in Part B inquire about the number of proposals the corporation receives on average, how the proposals are generally handled, and the approximate costs for working within Rule 14a-8 to attempt to exclude proposals or for printing proposals in the company's proxy statement. Two additional questions ask whether the company has an Internet home page and whether shareholders can communicate with the company via the Internet.

The deadline for returning questionnaires is March 31, 1997. The questionnaire can also be downloaded from the Commission's website (a convenient direct link is provided on the Society's home page), and responses can even be made directly on-line via e-mail. Questions about the survey should be directed to Frank Zarb at the SEC at (202) 942-2900.

McDaniel named Vice Chairman at Kerr-McGee

Resource Guide for Secretaries at IPOs

Using Fax-on-Demand saves time and money

Currently, more than 250 members are Fax-on-Demand participants. To register for the system, contact Blanca Rosbach at (212) 681-2010. Once you register, you will be issued a PIN (Personal Identification Number) that enables you to access the system and begin ordering documents.

What's New! on the Society's Website?

If you haven't clicked on to the website yet or haven't revisited lately, here is some of what you would find there:

• several responses from members' companies to a request from Ralph Nader that the companies open their annual meeting by reciting the Pledge of Allegiance to the American flag.
• a "Member-to-Member Open Forum", through which members can post questions about specific corporate practices and issues or add their own responses to the open discussion. One current question focuses on timing of dividends while another focuses on if and how companies are establishing a lead director position on their boards.
• Details about recent Society comment letters or SEC releases.
• Copies of several recent National Office "flash fax" communications to members.
• Information on the Society's Core Document Files (including the list of documents currently available) and Fax-on-Demand Service (including a copy of the current menu).

Another popular feature on the website is the extensive list of "Internet Sites of Interest" to which members can link directly simply by clicking their computer mice. Benasaraf has built in a number of shortcuts to help members access information they need more quickly. For example, you can link directly to the SEC's EDGAR archives or the new Plain English Handbook without having to go indirectly through the Commission's home page, which is often slow to access.

The National Office welcomes ideas from members about other ways to utilize the Society website. You can send your comments by e-mail to Benasaraf at rbenasar@governanceprofessionals.org or by more traditional phone or fax routes.

We need your annual meeting materials!

Members should also note that the list of Annual Meeting Dates and Locations for 1997 meetings is nearly complete and will be made available to members in March. Contact Blanca Rosbach or Olga Holmes to request the list.

Member discount now available from Bridgeway

Bridgeway will also include a regular column on Society activities in its quarterly newsletter to clients, link to the Society on its Internet website (http://www.bridge-way.com), and describe the benefits of Society membership in a pull-down menu within Secretariat called "About ASCS." The company will also co-sponsor some Society programs - such as the recent "Essentials" seminar held in Bridgeway's home city, Houston - and participate in vendor exhibits at Society seminars and conferences, such as the upcoming Automation seminar and the National Conference in Boston.

"Bridgeway has always had a strong commitment to the Society," said Bridgeway President Patrick O'Donnell, a Society member since 1991. "This level of cooperation is an honor for our company and something we hope to build on in the future."

Society President David Smith added, "Our experience tells us that the good relationship between the Society and Bridgeway benefits members by assuring that they are kept aware of important new technological advancements for the Corporate Secretary's office."

Bridgeway is a privately held developer of software applications for the Corporate Secretary's office and one of the fastest growing companies in the Houston area. Currently over 800 Bridgeway software products designed to handle recordkeeping and data organization for the Corporate Secretary's office and corporate legal department are installed in companies in the United States and Canada.

Members who would like to know more about Bridgeway's products can contact O'Donnell or Marketing Director Colin Hageney at (713) 552-0490, visit the company's website, or, better yet, try out the software at the Automation seminar in Chicago, March 20-21, or National Conference in Boston, July 9-13. A demo copy of Secretariat will also be installed on a computer in the National Office, and members are invited to come in for a test run.

Commentary

Proxy Voting and Corporate Governance -- For What?

I have often been asked why the Department of Labor has focused for the past 12 years on proxy voting and on corporate governance, and in particular, why we have been so concerned about process.

The answer to this question lies in our view of plan fiduciaries' substantive duties, which include a duty to aim for the best rate of return for the plan, taking into account its appropriate level of risk. Because many votes have economic consequences in the near or long-term for the plan, the vote is a plan asset which must be managed for the plan's benefit.

Once this view is understood, our focus on process is easily understandable. Well-managed plans clearly designate who has the authority to manage plan assets, have written policies governing their investments and monitor the plan's investments. Similarly, because the proxy vote is a plan asset, well managed plans clearly designate who has the authority to vote proxies, have written policies governing proxy voting, and have procedures for monitoring.

The Department completed its third proxy practices examination project in February 1996 and found that, in general, the plans we reviewed clearly designated who had the authority to vote proxies and the investment managers who voted the proxies had written policies governing the voting of their client plan's proxies and had documented the reasons for their votes.

However, the proxy project did uncover problem areas. A significant number of plans did not routinely monitor their managers' voting to ensure that proxies were voted in accordance with the plans' or managers' stated policies and few of the managers and plans surveyed engaged in any form of corporate governance activism. Equally important, many plans did not provide investment managers with voting guidelines and did not even review their managers' voting policies when they hired them. If plans do not have voting guidelines to communicate to their investment managers, there is a significant chance that the voting policies of the plan's various investment managers could cancel each other out.

The intelligent involvement of pension plans in corporate governance is important, because the investment practices of institutional investors, and particularly of pension funds, are vital to the long-term health of the economy. Also, because pension funds typically do not have the need for substantial short-term liquidity, they are able to engage in patient investing for superior long-term gain. But to do that, they need to invest and behave as active, involved owners.

The importance of institutional investors being active, involved shareholders was highlighted by the Capital Allocation Subcouncil of the President's Competitiveness Policy Council, which stated that the need to align the interest of owners, investment managers and companies was one of its four most important recommendations to increase the payoff from private investment in the American economy. And of course, such an increased payoff is reflected in increased shareholder value.

The Subcouncil said: "Rather than focus on, and carefully monitoring the performance of companies with the best long-term prospects, institutional investors tend to diversify and trade their holdings more than may be optimal for either their principals... or their portfolio companies. The transaction costs associated with portfolio turnover represent a deadweight loss to fund investors and beneficiaries."

The Subcouncil made several recommendations designed to get institutions to act as long-term owners. One was to acquire larger stakes in fewer companies. Another was to be actively engaged in the governance of the corporations in which they invest in.

Unfortunately, all too many corporate managers complain that they can't adequately manage for the long-term because of what they perceive as pressure for quick, short-term results from investment managers and from shareholders. Institutional investors, on the other hand, assert that this short-termism is due to the actions of self-interested corporate management.

This is where the issue of clear communication comes in. And this is why the written statements of investment policy, including proxy voting, are so important. Such statements are an ideal vehicle for pension plans to communicate their interest in long-term value maximization -- both to their investment managers and to the corporate community. Corporations concerned about patient capital should review the investment and proxy voting guidelines that their own pension plans provide to their managers, to assure that these guidelines do not promote short-termism. This would be one step on the road to plans becoming the committed owners described by the Competitiveness Policy Council. And corporations might be more apt to find the patient, far-sighted capital they say they need.

This is why we have emphasized proxy voting and corporate governance -- the active involvement of institutional shareholders in the governance of the corporations they own will lead to the more efficient use of capital, greater productivity and higher share prices over the long-term. Both the American economy and pension plans will be better off when plan managers act like long term owners rather than traders of the shares they hold.

Promotions and New Positions

• Rosa M. Alvarez, now Secretary as well as Legal Administrator, Community Energy Alternatives Inc.
• Geraldine L. Banyai, now Assistant Secretary, Paine Webber Group Inc. as well as Divisional Vice President and Assistant Secretary, PaineWebber Incorporated
• M. Sue Barnard, now Vice President-Administration and Secretary with National Energy Group, Inc., Dallas, TX
• Connie K. Beck, now General Counsel and Secretary with Guideposts A Church Corporation, Carmel, NY
• Kathryn L. Beck, now Vice President, Membership and Secretary The Pacific Stock Exchange Incorporated
• Nancy K. Bellis, now Assistant General Counsel-Corporate and Securities with Sears, Roebuck and Co., Hoffman Estates, IL
• Ivy S. Bernhardson, now Secretary and Associate General Counsel as well as Vice President, General Mills, Inc.
• H. Richard Boultinghouse, Jr., now Vice President- Marketing with The Herman Group, Inc., Dallas, TX
• James F. Brashear, now Associate General Counsel as well as Assistant Secretary, The SABRE Group
• Lois-Ann L. Brodrick, now Secretary with Echo Bay Mines Ltd., Englewood, CO
• William H. Buchanan, Jr., now Vice President-Law and Secretary, The Dun & Bradstreet Corporation, Murray Hill, NJ
• G. D. Caliendo, now Senior Vice President as well as General Counsel and Secretary, Orange and Rockland Utilities, Inc.
• Nancy J. Carrell, now Vice President, General Counsel and Secretary with Celanese Canada, Inc., Montreal, Quebec, CN
• Jacquelyn Chapman-Pointer, now Paralegal with Blue Cross and Blue Shield of North Carolina, Durham, NC
• Nancy Cherney, now President and CEO with CGD Financial Services, L.L.C., Novato, CA
• Peter J. Chilibeck, now Senior Vice President and General Counsel with IMAX Corporation, Mississauga, Ontario, CN
• Sheila O'Connell Cooper, now Executive Vice President as well as General Counsel and Secretary, Mary Kay Inc.
• Dwight L. Cramer, now Senior Vice President-Law and Secretary, Western National Life Insurance Company
• Richard P. Daingerfield, now Executive Vice President and Chief Legal Officer with NatWest Group Holdings Inc., New York, NY
• Richard de la Pena, now Executive Vice President, General Counsel and Secretary with Union Safe Deposit Bank, Stockton, CA
• Patrick D. de Maynadier, now Senior Vice President and General Counsel with Sterling Diagnostic Imaging, Inc., Newark, DE
• John B. Douglas, III, now Senior Vice President, General Counsel and Secretary with Apple Computer, Inc., Cupertino, CA
• Karen G. Fink, now Vice President, General Counsel and Secretary with Concurrent Computer Corporation, Fort Lauderdale, FL
• Martin E. Freidel, now Special Counsel with Miller & Welch, LLC, Denver, CO
• Lucinda J. Gannon, now Counsel with CoreStates Bank, N.A., Philadelphia, PA
• Joseph P. Garay, now Executive Vice President with G.A. Pipe Inc., Langhorne, PA
• Robert E. Lee Garner, now Partner with Haskell Slaughter & Young, L.L.C., Birmingham, AL
• Patrick J. Guarino, now Executive Vice President, General Counsel and Secretary with Ultramar Diamond Shamrock Corporation, San Antonio, TX
• Kathleen M. Gibson, now Vice President and Assistant Secretary with Honeywell Inc., Minneapolis, MN
• Gilbert E. Haakh, now Of Counsel with McKenna & Cuneo, L.L.P., Los Angeles, CA
• Nancy E. Hamilton, now Vice President and Secretary as well as Senior Counsel, Ralston Purina Company
• Morris J. Hartman, now General Counsel and Secretary with Landvest Homes, Inc., Plymouth, MN
• Paul M. Haygood, now Partner with Correro Fishman Haygood Phelps Weiss Walmsley & Casteix, L.L.P., New Orleans, LA
• Stephanie G. Heim, now Senior Counsel with Gateway 2000, Inc., North Sioux City, SD
• Sidney O. Hoover, now Secretary with Economic Development Partnership of Alabama, Birmingham, AL
• Russell G. Horner, Jr., now Senior Vice President and Secretary as well as General Counsel, Kerr-McGee Corporation
• Kelly Jameson, now Assistant Secretary and Attorney at Law with El Paso Energy Corporation, Houston, TX
• Richard B. Johnson, now Senior Vice President, Business Unit Manager with SunGard Shareholder Systems Inc., Atlanta, GA
• John K. Kelly, now Senior Vice President with MacKenzie Partners, Inc., Los Angeles, CA
• Tracy S. Kirby, now Vice President-Sales, with Merrill Corporation, St. Paul, MN
• Ellen M. Kirsh, now General Counsel, Vice President-Corporate Development and Secretary with Digital City, Inc., Vienna, VA
• Ira J. Krakower, now Vice President, General Counsel and Secretary with Hexcel Corporation, Stamford, CT
• Jo E. Lamoreaux, now Chief Financial Officer with XP Systems, Moorpark, CA
• Roderic W. Lewis, now Vice President-Legal Affairs, General Counsel and Secretary with Micron Technology, Inc., Boise, ID
• Edward Lopez, now Senior Corporate Counsel as well as Assistant Secretary, Nellcor Puritan Bennett Incorporated
• Howard Malovany, now Assistant Secretary-Corporate Affairs with Wm. Wrigley Jr. Company, Chicago, IL
• Richard D. Manthei, now Vice President-Scientific Affairs with C.R. Bard, Inc., Murray Hill, NJ
• Peter L. McCorkell, now Senior Vice President as well as Secretary and General Counsel, Fair, Isaac and Company, Incorporated
• Michael R. Moran, now Corporate Senior Vice President as well as Secretary and General Counsel, Spiegel, Inc.
• Ann C. Mule', now General Attorney as well as Secretary, Sun Company, Inc.
• Ellenore O'Hanrahan, now Vice President, Deputy General Counsel and Secretary with ACNielsen Corporation, Stamford, CT
• George H. Pain, now Vice President, General Counsel and Secretary with Primex Technologies, Inc., St. Petersburg, FL
• Ann M. Pare, now Corporate Counsel and Secretary, Central Maine Power Company
• Arlene Powis, now Manager-Corporate Administration with Schlumberger Limited, NY
• Ellis A. Regenbogen, now Executive Vice President, General Counsel and Secretary with Search Capital Group, Inc., Dallas, TX
• Douglas J. Reich, now Senior Vice President, General Counsel and Secretary, WavePhore, Inc.
• Laura M. Ritzko, now Associate Secretary, The Penn Mutual Life Insurance Company
• Linwood R. Robertson, now Executive Vice President as well as CFO and Treasurer, Dominion Resources, Inc.
• W. Bayless Rowe, now General Counsel and Secretary with Deltic Timber Corporation, El Dorado, AR
• Lawrence E. Schauf, now Executive Vice President and Secretary with Foodmaker, Inc., San Diego, CA
• Ana Sejeck, now First Vice President-National Accounts with Smith Barney Inc., New York
• Nita Sobejana, now Secretary, Levi Strauss & Co. Larry J. Svoboda, now Senior Vice President and CFO with Hanover Direct, Inc., Weehawken, NJ
• Tracy P. Thrasher, now Executive Vice President as well as Secretary, MedPartners, Inc.
• James L. Vandeberg, now Partner with Vandeberg Johnson & Gandara, Seattle, WA
• Patricia A. Wilkerson, now Secretary, Dominion Resources, Inc.
• Gail S. Wilson, now Senior Assistant Secretary with Primex Technologies, Inc., St. Petersburg, FL
• Robert H. Young, now Executive Vice President and Chief Financial Officer as well as Secretary and Treasurer, First Western Bancorp, Inc.

Society teleconferences put experts "on-the-line"

The teleconference format consisted of panel presentations followed by a question-and-answer period. Members were in a "listen-only" mode during the presentation. They then queued up to ask questions by pressing a key on their telephones and were invited to speak one at a time.

American Teleconferencing Services, Ltd, a firm with considerable experience in coordinating conference calls involving companies and financial analysts provided the phone link technology and staff needed for each teleconference. The National Office handled all administrative fees associated with these first programs, with the assistance of generous underwriting grants from First Chicago Trust Company of New York. Members paid only their own long distance charges for connecting to the call. Materials provided by speakers have been made available to participants and the membership at large via the Society's fax-on-demand program or posted on its Internet website (www.ascs.org). Members who missed the teleconferences can also borrow a tape recording of each program from the National Office. The tapes are available only to members and may be copied before they are returned to the National Office.

Panelists discussing direct registration on January 24 included Jim Volpe from First Chicago Trust Company of New York, Lorne Price from ChaseMellon Shareholder Services, Gordon Garney from Mobil Corporation and Joanne McGuire from NYNEX Corporation. All are participants in the direct registration system pilot being coordinated with the Depository Trust Company. Volpe and Price participated in the February 11 call as well, along with Paula Clayton from Amoco Corporation, Larry Menter from The Home Depot Corporation, and both Marty McDermott and Karl Wagner from Merck Corporation. Amoco, Home Depot and Merck all have open enrollment plans in place currently. First Chicago and ChaseMellon are among the transfer agents who help companies set up and coordinate direct purchase plans.

The National Office is excited about the potential added value this teleconference medium can bring to its members and is planning to present teleconferences on a regular basis. If you have suggestions for future topics or questions about how to use telecommunication in your company or chapter, please feel free to call Michael Goodman at 212-681-2013 or Harriet Chabrowe at 212-681-2009.

The Corporate Secretary is published 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 information contained in this newsletter should be directed to Geoff Loftus, at (212) 681-2000 or by e-mail: gloftus@governanceprofessionals.org. Inquiries regarding membership or publication orders should be addressed to:

Membership               Publications
Deborah Fox              Olga Holmes
(212) 681-2014           (212) 681-2015

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