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 Number 2-97
ASCS to sponsor forum on proxy process issuesOver the past 18 months, one aspect of the proxy process has come under careful scrutiny - the fees associated with the assembly and distribution of annual meeting materials to street name accounts. Resulting from the discussion has been a one-year pilot program of reduced fees for this work, incentives to consolidate mailings to the same household and the imposition of a $20 per nominee coordination fee for intermediaries who do this coordination role.While the fee issue has dominated much of the recent discussion, issuers, investors and the SEC have begun posing some key questions about the ways proxies are distributed, voted, and tabulated. For example, investor groups have voiced a strong interest in the establishment of a system for end-to-end vote confirmation, issuers have asked for guidance on ways to use new technologies for proxy distribution and voting, and the SEC has posed a number of questions concerning the 10-day rule and company discretionary voting power. The issues are complex and opinions vary widely. In view of this, the Society will sponsor a forum in New York City on June 20 to focus on the proxy process. The Proxy Process Forum will be co-chaired by Society members Philip Lochner of Time Warner, Inc. and a former Commissioner of the Securities and Exchange Commission, Lawrence Menter of The Home Depot, Inc., and Kurt Schacht of the State of Wisconsin Investment Board. Other participants will include representatives from issuers, institutional and individual investor groups, transfer agents, proxy solicitors, tabulators, ADP, the brokerage community and the exchanges. The concept of such a meeting was first proposed by Kathleen Shannon, Chairman of the Society's Securities Industry Committee, at the Society's open hearing with the SEC in April. Addressing SEC Chairman Arthur Levitt, Commissioner Norman Johnson and several senior staff members, Shannon offered the Society's help in sponsoring a forum to focus on the proxy process itself. "All parties in the process should be involved in examining the system and suggesting appropriate steps to remedy any problems.... At the same time, great care must be taken not to embrace proposed solutions which might undermine a process which is serving us well, even if it isn't perfect." Among issues expected to be discussed at the Forum are: the 10-day rule, an SEC query concerning company use of NOBO lists to distribute proxy voting materials, whether "Just Vote No" campaigns should change the status of routine meetings, the feasibility of a vote confirmation system, Internet and phone voting, householding of proxy materials and last-minute voting by institutions. Society President, David Smith, who has been a strong advocate of bringing all parties together to discuss the proxy process has urged the Forum chairs to keep the meeting very focused and results oriented. "Our challenge is to tackle this subject issue by issue and move on to conclusions, even if a conclusion is that the group can't agree," Smith stated. He added: "Whatever the outcome, the fact that all parties to the proxy process now have an organized vehicle for meaningful conversations in the future represents real progress."  FROM THE CHAIRMAN
Fellow Members:Receiving the brochure for the Society's national conference is always exciting, for it sets out the program and related events in a trip that is a high point of the summer for both my wife Sissy and me. Having attended 18 of the past 19 conferences, you could say we are addicted and don't need much selling; however, the bright, bold Boston brochure for the fifty-first National Conference appears to offer even greater-than-normal attractions for getting away from the office for a few days of improving one's skills as a Corporate Secretary. The Boston location will be the Society's first time in this city that the membership previously identified as most-desired for a national conference. The National Conference Committee and the National Office staff have done a terrific job in organizing this conference around the theme "The Corporate Secretary: Adding Value." Most important, the featured speakers and the panel programs are outstanding and cover a range of skills and interests of our membership. In addition, there are optional courses available on Wednesday; the key national committees will all hold meetings; and special events have been planned for Society members and their families. The opportunity to catch up with old friends and make new acquaintances gives an important personal touch to the networking that can be an effective element in adding value in our role as Corporate Secretary. Pre- and post-conference tours are available for those who would like to combine the meeting with some vacation time in the area. Those of us who attend the national conference keep coming back, year after year, until retirement (and beyond in many cases). I urge those members who have not yet attended to join us this year. I think you will learn how the combined resources of the Society at this event can make participants return home with an inspired new vision for developing the role of the Corporate Secretary at their company. The brochure for the National Conference also signals the end of my tour as the Society's 51st Chairman, which comes to a close at the annual meeting on Saturday, July 12. It has been a great privilege to serve with the Society's directors, officers and committee chairmen in governing this fine organization during the past year. As I consider the state of the Society, it is clear that the membership numbers and finances are in great shape. We have exceeded our goals for recruiting new members, and the annual financial report sent to members shows a positive operating budget and a strong balance sheet. More important to our members, the National Office staff have been working to elevate the substantive support available from the National Office. It is quite extraordinary to realize that each of our more than 3,600 current members is linked for easy access to the National Office through telephone, fax, E-mail, or the web page (http://www.ascs.org). I can think of no other professional organization that offers comparable services and support to individual members.
I hope to see many of you in Boston. When you are there, please take a moment to say hello and let me have your views on how the Society can improve in supporting you in your important role as Corporate Secretary. Membership recruiters set recordAs a result of a successful recruiting campaign, ASCS membership topped 3,670 on March 31, the highest total in Society history. And while all members will benefit by the Society's growth, four members in particular were the big winners, earning exciting vacation prizes awarded as part of this year's membership campaign.Lawrence Bloom, a past president of the Middle Atlantic Chapter, won the grand prize, a three-day stay at the Hotel Del Coronado in San Diego, including roundtrip airfare provided by United Airlines. Anyone who recruited at least one member was eligible for the drawing to win that trip. The prize for top recruiter of the year went to Peggy Foran of the New York Chapter. She'll be heading off for a vacation for two at The Greenbrier. Stephen Paul, past Houston Chapter president, was the number two recruiter and earned a vacation package from The Broadmoor. Tracie Vicki of the Hartford Chapter won the third-place award, a romantic weekend getaway to the St. Regis Hotel in New York. In all, 660 new members joined the Society during the 1996-97 fiscal year, nearly 150 more recruits than joined in the previous year. Eleven local chapters met or exceeded their membership recruiting goals, and the Phoenix Chapter earned a $1,000 prize as the chapter with the highest percentage growth in new members.
Strickland, Barnickol named to lead Society in 1997-98 Carol Strickland, a former chairman of the Society's Budget and National Conference Committees, and Karl Barnickol, an expert on SEC-related matters who formerly chaired the Society's Securities Law Committee, have been nominated to serve as ASCS Chairman and Chairman-Elect, respectively, for the 1997-98 year. They will stand for election at the Annual Meeting of Members at the National Conference in Boston, July 12. Also up for election are eight nominees for three-year terms as Society directors. [Biographical information concerning each of the nominees is included in the Society's annual report and proxy statement, recently mailed out to the membership along with proxy cards and return envelopes that can be used for voting.] Strickland, who serves as Senior Vice President and Secretary of U.S. Trust Corporation in New York, will become the first Society Chairman from a company traded over the Nasdaq Stock Market. She has been a member of the Society since 1977 and has served in a variety of leadership capacities on the national level, as well as presiding over the New York chapter in the mid-1980s.
The eight nominees for board terms expiring in 2000 are: George Chamberlain of Delaware Management Company and The Delaware Group of Mutual Funds in Philadelphia; Earl Franklin of Eaton Corporation in Cleveland; Heather Howard of The Boeing Company in Seattle; Robert Koch of Texaco, Inc. in White Plains, NY; Christopher Screen of Entergy Corporation in New Orleans; Kathleen Shannon of American International Group, Inc. in New York; Roger Smith of Minnesota Mining and Manufacturing Company in St. Paul, MN; and Hilman Walker of Chevron Corporation in San Francisco. Franklin, Howard and Walker have all previously served on the board, completing unexpired terms of former directors, and are now nominated for their own full terms. New publications focus on disclosure, governanceMembers of the Society's Corporate Practices Committee are following a new approach as they develop many of the Society's key new publications. Under the leadership of its chairman, Cheryl Sorokin of BankAmerica Corporation, the group has decided to focus on brief, practical monographs - with a less formal look and writing style - that concentrate on one specific aspect of the Corporate Secretarial function, rather than more extensive and formal manuals and guidebooks.The committee's two newest publication projects have followed this approach. Suggested Guidelines for Public Disclosure and Dealing with the Investment Community, developed by a subcommittee headed by Kathleen Gibson of Honeywell Corporation, focuses on company policies related to public disclosure and working with analysts. The 12-page booklet provides practical suggestions for developing internal policies and procedures in these areas to enhance a company's credibility and minimize the risk of legal liability. It revises and updates materials contained in a previously published Society monograph to include discussion of such topics as the "Bespeaks Caution Doctrine" and the "safe harbor" for forwarding-looking statements as well as increased focus on the MD&A section of company annual reports to shareholders. In following the committee's new publication style, the monograph also contains several sidebars that illustrate points in the text and a checklist of "Keys to a Sound Disclosure Program." The second new publication, Review of Board Practices by Boards of Directors, complements the Current Board Practices survey report published by the Society in 1996. The monograph, developed by a subcommittee headed by Alan Rudnick of CSX Corporation, discusses 15 specific board organization and operation practices that may have an impact on board effectiveness and also provides an extensive bibliography to update members on current thinking and writing on corporate governance issues. Integral to the philosophy of the monograph is a quote from legendary American satirist Will Rogers included in its introduction: "Even if you're on the right track, you'll get run over if you just sit there." The National Office faxed out forms in March to enable members at the time of publication to order complimentary copies of both monographs. Nearly 1,000 members returned the forms during the two-month period set aside for ordering copies free of charge and have been mailed the monographs. Each publication is now available from the National Office for $25 for members and $50 for non-members. To order, contact Berta Czeczyk in the National Office at (212) 681-2015 or via e-mail at publications@governanceprofessionals.org. Several members have also requested additional copies for their management or board members. The National Office is pleased to offer a substantial discount for orders of 10 copies or more - $15 per copy for orders placed by members.
Telephone proxy voting passes the test at LucentAs a new company holding its first annual meeting this past February, Lucent Technologies decided to put a new voting process - proxy voting by telephone - to the test. It thus became the first company with more than 150,000 shareowners to try out telephone voting. And the company believes that the process passed with flying colors. According to figures released by Lucent, 27.1 percent of all shareowners who voted this year did so by telephone. Even more remarkable was the fact that 65 percent of 232,406 shareholders voting in the first 14 days following mailing of proxies voted by telephone.In all, more than 210,000 telephone votes were tabulated for the company's 1997 meeting, with only 1,550 duplicate votes and 941 accounts voting by both card and telephone noted by the company's tabulators. "We believe we would have been even more successful," notes Rhoda Anderson, Lucent's Director-Corporate Secretary's Department, "if we had known how quickly people would respond to the proxy." Lucent sent out its proxy materials by third-class bulk mail just prior to New Year's Day., drop-shipping the materials to regional postal centers. Yet 60,000 votes poured in by telephone in the first five days after the initial mailing. "We don't know how many calls went uncompleted because we were not yet fully ready to handle responses," Anderson said. She added that Lucent is very gratified with the results and plans to continue to use telephone voting in the future. Not only did the company receive a very high return, but it also saved money. "We know that the cost for each call was less than the cost would have been for return postage." Lucent's telephone voting process was coordinated by Proxy Services Corporation and was one of 21 companies that PSC has handled so far this year (see December 1996 issue of The Corporate Secretary for an earlier article about PSC and the logistics of telephone proxy voting). PSC President Charles Purcer noted that his company had learned some valuable lessons from experiences at Lucent and the other companies it has worked with in 1997. For example, Purcer says that companies that were able to obtain toll-free 800 numbers rather than 888 numbers achieved a higher vote. "Shareholders seem to feel they may have to pay for 888 calls," Purcer said. "In fact, even the expression 'toll-free' seems to cause some confusion. We made sure to include a notation You will not have to pay for this call on some of the proxy cards." The way information is laid out on the proxy sheet also affected how shareholders voted in some cases, according to Purcer. When shareholders first connect to the company's number, they are given two options. They can either vote for all items recommended by the company's board, or they can choose to vote for each proxy item separately. "When a proxy form clearly highlighted how the board recommended voting, over 90% of callers voted that way," Purcer said. Companies that didn't make board recommendations as clear to follow received a lower percentage of voters choosing the first option, and each toll-free call took longer and cost the company more. Another good lesson was that the personal identification number (PIN) used as an "electronic signature" on ballots should be kept to no more than eight or nine digits. Purcer says that one company's transfer agent had assigned a 12-digit PIN to accounts and found that the percentage of incomplete calls was higher than at other companies, since some shareowners found it difficult to type in all of the digits in correctly. Purcer added that it is helpful to divide code numbers of any length into smaller segments of no more than three digits. The "Whens" and "wheres" of 1997 annual meetingsMany Society members are breathing a little easier these days, now that their company's annual meeting of shareholders has come and gone. And, luckily, for most members, this year's event was "uneventful."To help in your planning for next year, the Society has completed its yearly study of annual meeting dates, locations and practices. [The annual meeting list, containing information about 925 company meetings in 1997 is available from the National Office at a cost of $18. Please contact Blanca Rosbach at (212) 681-2010.] Here are some key facts from the survey:
The honor of first meeting of the year went to Communications Central, Inc., which held its meeting on January 8 in a hotel location in Roswell, Georgia. The last meeting planned in 1997 will be Amcast Industrial Corporation's gathering at its Dayton, Ohio, headquarters on December 18. And the distinction of largest attendance easily goes to Wal-Mart Stores, Inc., which follows a practice of having a representative from each store in the world attend the meeting at company expense. This year more than 17,000 people attended the meeting held June 6 at the University of Arkansas.
Hercules' plain English proxy breaks new groundSEC Chairman Arthur Levitt recently praised Society members for their ground-breaking efforts in using plain English principles in their disclosure documents. "You [Society members] have moved us ahead by years from what we could have accomplished by ourselves," he commented.One member who has been particularly innovative in putting plain English to work is Israel Floyd of Hercules Incorporated. Floyd and his staff have made a radical change in the organization and look of their company's most recent proxy statement. The changeover required challenging some age-old views about the proxy and winning over members of management who were somewhat skeptical when the project began. The product clearly stands out. Below, Floyd answers questions about Hercules' new type of proxy and how it came about: Q: What is Hercules' traditional philosophy concerning its proxy statement? For example, why do you often use artwork on the cover and give the proxy a thematic title? Floyd: Our philosophy changed in 1993 when we changed Corporate Secretaries. My predecessor felt the proxy was a legal document that should simply comply with SEC requirements. I questioned that idea. I felt the proxy was a part of our overall shareholder communications package and should reflect that concept. The proxy and annual report should be more complementary. After all, they usually sit together. So I began tinkering with our proxy each year - as far as the regulations and management would allow me to go. Two years ago, in 1995, we started to link up the two documents and to make the proxy more user-friendly. Using similar artwork and the same theme on the covers of both documents emphasizes the link. The same theme is used for our annual report, proxy and annual meeting. It's what we want to communicate to shareholders about the company that year. Q: Hercules has obviously embraced the idea of using plain English in its proxy statement. Why did you decide to do so? Floyd: When the SEC issued a call for companies to step aboard the plain English pilot, I gave them a call. I said, if you're willing to extend the pilot to '34 Act documents, I'm willing to step up with you. I spoke to my management to convince them that there was not a tremendous downside to this. Many organizations feel there is no reason to change the proxy. They believe you really don't gain anything but good will and that doesn't balance with the risks. I worked things out with my management and continued to talk with the SEC. I'm pleased that the Commission staff said, "Go ahead. We like plain English. Why don't you try it?" We put together a draft that went over well with the staff. Q: How did you convince your management? Floyd: Our timing was good. We had a changeover of our CEO this year, so it was a good time to try something new. Of course, I also had to go on the line personally and accept full and unadulterated responsibility if there were any problems. The main thing I pointed out to management was that if we start this process, we're stuck with it. We shouldn't get on this road if we were not willing to stay on it. You can't follow an open, plain English approach when you have a good story to tell and then abandon it when you have a bad story to tell. Management has to be willing to say we had a lousy year in plain English. I explained that it would be highly dramatic for Hercules to go back to a legalistic report designed to make it less clear that the company was doing poorly or that compensation was out of whack with shareholder return. Q: How long an argument was that? Floyd: It was a lot of short arguments, but they were repeated. The CEO thought about all of this for a while. He didn't give me an answer right away. Then he said he was willing to go along with the changes for the tenure of his chairmanship. At the same time, I was juggling with the SEC. I wanted to make sure they meant what they said and were willing to allow a plain English proxy. I didn't want an adversarial relationship with the SEC, and we didn't want an analyst to press legal action. Q: Who was involved in the planning, writing and approval processes? Floyd: Mostly my office. One of our legal assistants was given the responsibility to become an expert on the SEC's plain English handbook. She kept pushing us to find an easier way to say something. An HR person also joined our team, and a printer and their art graphics designer, and a communications person within the company. It took a considerable effort and a lot of changes along the way. We did our own "focus groups," using company employees, since we were always focusing on the idea that our intended audience was company employees, plus individual investors and retirees, not analysts. We kept the lawyers, except for me, out of the way to make sure that no one would say, "The regs won't let you do that." Q: Some parts of the current proxy are particularly appealing: e.g., large type and headlines, the use of question-and-answer sections for general information and the Compensation Committee report, including photos as well as financial information for named executive officers, well-spaced graphs and charts. What was some of the thinking behind these changes? Floyd: With the Q&A sections, most people like that format. We got some grief internally, particularly our decision to include beneficial ownership information as part of the Q&A. Once we went with a Q&A format for the general information, we felt it would be an inconsistent product to follow a legalistic approach for the Comp Committee report. It had already been written in legalistic format. We had to convince the committee and HR people to let us work with the report. We told them that if they objected, we could go back. People saw the new style and said, "Yeah, that's a better report!" Q: What about some of the other changes? Floyd: As we got into the report, we found ways you could do things that the regs didn't prevent. When we were reading the regs, we came to the conclusion that the performance graph didn't have to go in the back of the Comp Committee report. The SEC agreed that the regs didn't really require that. So we changed it. We put the graph in what is actually the center of the report [where the staple goes]. Also, most people turn to the proxy to find out the compensation of senior management. So we put the information on management compensation in the centerfold along with the performance graph. Now, it is easy to compare what I [the stockholder] got out of the company in 1996 with what management got out of it. That's what people really want the most, and they're going to find it anyway. So we made it easier for them. Q: What changes did moving to plain English necessitate in the process of writing and reviewing the proxy statement? Did your timetable expand? Floyd: The timetable didn't expand from the starting point to the end point. We had to put more effort in between, however. We tried to work harder, smarter and longer. Next year the process will be easier because we have a new template to work from. The only thing that could have thrown a wrinkle into our plans was if we had to file a preliminary proxy with the SEC. Luckily, we didn't have to do that. As for our approach in writing the proxy - we challenged every statement and paragraph we wrote. If there were duplications, we combined them. We would ask questions like: Why is this in here? What does it say? If it has to be in, why is it located here? Why is it worded this way? Q: Was the SEC helpful in the process? Were staff members easy to work with? Floyd: We got a lot of cooperation from the SEC. I was very pleased. They went through last year's proxy with us and told us where it could have been done better. We worked with their handbook. I felt some reticence that the SEC would start dictating what we could do. It would have been embarrassing to have to walk away from the project. These thoughts make you gun-shy. I was pleased with the support we got from them, but I don't know if they would have the resources to do this for 100 companies. Q: Was Hercules concerned about being "ahead of the curve" on use of plain English? Floyd: Luckily, I'm also assistant general counsel of the company and the key lawyer on this item. We don't use an outside law firm for our SEC filings. I did talk to some law firms. Their general response was "what's your upside?" They thought we should use the "leap frog approach" - let others start and improve on what they do. I'm a risk taker, though. I wasn't afraid of being ahead of the curve. Q: What has been the response of management? The board? Shareholders and analysts? Company counsel? Floyd: Management was pleasantly surprised. They had no idea of what the product was going to be. They thought it would look like the old proxy but with better wording. We didn't even let them look at drafts as we developed the proxy because we didn't want individual parts to be criticized. When we got it formulated enough to seem like a complete product, we let the CEO see it. When all of the management team saw the finished proxy, some said, "Wow! What have you done here?" They liked the fact that you can get at key questions easily and the prominence given to executive compensation and shareholder return. We thought some of the execs would object and say, "I'd like to be back on page 34." But we didn't get that response at all. We have gotten a number of calls from shareholders complimenting us on how easy it is for them to read the proxy and find things in it. One of our senior executives also told us his wife said this is the only proxy of ours she's ever read. She usually put the proxy statement in the same category with old prospectuses. We've also gotten positive feedback from the SEC (they asked for 300-400 copies) and the press. We've had no direct comment from analysts or ISS. As for other corporations, some said, "That's nice. Let's wait and see." Q: Are there some additional ideas you can share with other companies? Floyd: If you normally have a law firm do your proxy, you'll have more of a problem changing over to plain English. Most lawyers don't think that way. We also turned a lot of things over to a graphic designer, which can be pretty expensive. It's a little like creating an annual report on lighter weight paper. We still haven't seen all of the bills from our printer. Q: What changes do you envision for next year's proxy? Floyd: We don't think we've hit perfection. We're committed to continuous improvement and to making the proxy an even clearer document. We will be walking the "plain English road" at Hercules for the foreseeable future
Society recognizes and honors its long-term membersSeveral years ago, the Society established two "clubs" to honor those who have been regular or honorary members of the ASCS for at least 15 years (the "Silver Quill Society") and to provide special recognition for those who have maintained a connection with the Society as a regular, honorary or associate member for 25 years or more (the "Quarter-Century Club"). The members below have been sent silver and gold recognition pins to signify their addition to one of the two special Society clubs in 1997. Quarter-Century Club members will also be honored at a breakfast at the National Conference in Boston.New Quarter-Century Club members: Philip Ball Philip O'Connell Jeanne Brelle Walter Pavlick Gerald Dicker John Pyke Eugene Flanagan Robert Pyle Michael Fortado Thomas Senf Barry Hirsch Martin Strobel David Kuhn William Wildhack New Silver Quill Society members:
Patricia Aftoora John Lenhard Richard Agnich Jack Livingston J. Wilma Aly Albert Mauro Robin Bourne-Caris Kevin McNamara Robert Boyd Kay Nalbach Richard Brickson Patricia Neighbors Emmet Cassidy Marshall Ordemann Thomas Chapple Elizabeth Overmyer David Cofer Mary Pullum Nanda De Roes George Reath Lawrence Dickie Noah Rockowitz Daniel Fahey Alan Sachs John Flynn George Spillane Donald Geary Annette Valentine Jerrold Gilbert Gregory Van Gundy Robert Grace Lawrence Westfall Connie Holbrook Martha Williams Joseph Kane Herbert Wolff Ellen Kirsh Robert van Schoonenberg Elizabeth Lally
Put a Society fall conference on your calendar Members of the Southeastern Chapter and guests gather for a poolside dinner at the group's annual spring conference in Hilton Head, SC. The two-day business program featured an address by University of Michigan professor Paul Seguin on "Corporate Finance 101," as well as panels on the Internet and other emerging technologies, key principles related to plain English disclosure, the current and future directions of the stock transfer industry, trends in corporate governance and shareholder activism, and cultural diversity. And that was just the business side of things. More than 75 members and guests attended the event.The Society's National Conference Committee is not the only group busily at work planning a program to provide valuable learning and networking opportunities for Society members. Six regional fall conference committees are also formulating agendas, sending invitations to expert speakers and panelists, and arranging social activities at some of the most exciting locations around the country for meetings in September and October. It's not too early for members to mark their calendars for their chapter's fall conference. Check the schedule below. And while fall conferences have long played an important part in Society programming, this year's meetings are definitely not going to be "business as usual." For example, from October 16-19, members of the Society's New York, Eastern New England, Hartford and Fairfield-Westchester Chapters will gather with colleagues from the Middle Atlantic Chapter for the groups' first joint fall conference. Appropriately enough, this "blockbuster" event will take place in Philadelphia at the Four Seasons Hotel. Another meeting of note will take place in Asheville, North Carolina, October 2-5, when the various Southern chapters (Colorado, Dallas, Houston, New Orleans, and Southeastern) extend their special brand of hospitality to members of the Kansas City, Oklahoma, and St. Louis Chapters for a rip-roaring joint conference. And a third gathering that will have a different touch this year is the joint conference of the Ohio, OKI Tri-State and Pittsburgh Chapters at Nemacolin Woodlands Resort, September 19-21. This year, those groups will play host to the Society's Board of Directors and national committee chairmen. What makes a Society fall conference so special? According to Southeastern Chapter President Trey Paris, "There is an invigorating aspect to fall conferences, not only because of the season but also due to the refocusing which occurs at the conferences following the summer and before the crush of work surrounding the end of year and the beginning of the next proxy season." He added that there is also something special about members gathering with their colleagues from other geographical areas - friends they often see only at National Conferences. What if your business schedule conflicts with the dates of your chapter's conference? Society President David Smith suggests you not let that stand in your way of attending a valuable meeting. "There is absolutely no rule that says, 'If I can't make the New York Chapter's Fall Conference this year, I'm out of luck.' Pick a conference which fits with other personal or business plans and register for that one. Call Blanca Rosbach in the National Office (212-681-2010), and she'll help you with the details."
1997 Fall Conference Schedule:
Society NotesNew logo promotes a more modern look for the Society A quick glance at the cover of the Society's current annual reveals the Society's new, "modern-look" logo. The green double bars surrounding a bold ASCS is replacing the quill and inkwell symbol that was first adopted in 1952. The new logo will soon be appearing on Society stationery, publications and brochures. But the old symbol will not be deserted entirely. A new stylized quill will be used from time to time in future Society communications as a link to tradition. The board and National Office felt that a new look was in order as the Society enters its second half-century and attempts to develop a higher profile and increase its technological capabilities.
Dallas' "practical" program attracts enthusiastic responseThe Dallas Chapter took a practical approach to its March 18 meeting and attracted a larger-than-usual crowd, according to local president Ron Jarvis of Exxon. A panel discussion moderated by Alan Kailer of Jenkins & Gilchrist focused on the topic "Practical Aspects of the Corporate Secretary's Function: Board Meeting Minutes and Levels of Authority." Other panelists included Michael Fortado of Enserch Exploration, Carol Hilburn of South-land Corporation, Jim Parsons of Exxon and David Sudbury of Commercial Metals. More than 40 members attended the luncheon meeting and participated in a lively discussion.States award members CLE credits for Society programsMany members have found an added reward to attending Society seminars and conferences -- not only do they have an opportunity to learn and network, they also can gain valuable Continuing Legal Education credits required in many states. Here are a few recent responses from states to requests for CLE creditation: Minnesota awarded 11.5 hours of credit for attendance at the Essentials program in Washington, DC in October 1996; Florida awarded 6.0 hours of credit and Virginia 4.5 hours for the ASCS Southeastern Chapter's "Florida mini-conference" that featured an address by controversial corporate executive Albert Dunlap; Wisconsin awarded 13.5 hours of credit and Ohio 11.5 hours for attendance at the Essentials program in Houston in January 1997.Please respond to new board practices survey questionnaireThe Society's Current Board Practices survey report, published in 1996, has been one of the most valuable and most widely distributed of all Society studies. The survey focuses on 34 specific practices of companies with regard to board organization, committee structure, compensation, guidelines, meetings and evaluation. What makes the report especially meaningful is the fact that more than 800 companies' practices were analyzed in the study, thanks to a strong response from the Society membership.The Corporate Practices Committee would like to follow up on that study to note if any new trends have developed with regard to different practices over the past two years. To that end, the committee is currently revising the original questionnaire and will distribute a new one within the next few weeks. It is important that as many responses as possible be received to provide a large body of data for analysis. Members should also note that, following Society practice, complimentary copies of the new report based on the survey will be sent only to those members who complete and return their questionnaires. Judy Anderson named YWCA Woman of Achievement Judy Anderson, Vice President and Secretary of Georgia Power Company and a Society member since 1984, has been selected as the 1997 Woman of Achievement by the YWCA of Greater Atlanta. She joins an illustrious group of former winners, who include Rosalynn Carter, Coretta Scott King, Johnetta Cole, Gladys Knight, Jean Childs Young and Shirley Clarke Franklin. In addition to her corporate secretarial duties, Anderson oversees administration of Georgia Power's headquarters facilities and serves as executive directors of the Georgia Power Foundation. She also chairs the Fulton County Arts Council and is a trustee or director of a number of other civic and business groups in Atlanta.
Corporations play active role in Section 16 complianceby Dr. Carr BettisDr. Bettis is a professor in the School of Management at Arizona State University West in Phoenix, Arizona. He is currently working on two academic papers based on the research discussed in this article. How effective are Section 16 regulations and what role do corporations play in regulating and monitoring trading activities of their insiders? These are questions that have been discussed in academic circles but not really researched in depth. With the assistance of the ASCS, I recently conducted a survey of the Society's members to learn more about the corporate policies and procedures governing the reporting and trading of Section 16 insiders. Members from over one-third of the public companies represented in the Society's membership responded to the survey. The results clearly indicate that companies (represented by survey respondents) are well aware of the rules and regulations that govern insiders and that they are concerned about compliance. In fact 97% of the companies have policies that affect the trading and reporting activity of their insiders. It is commonplace for a company to provide training for its insiders, and to provide various forms of reporting and filing assistance. In addition, companies frequently require/recommend pre-approval (i.e., pre-clearance) of trades, specify periods when their insiders are permitted to trade, and define who in their organization must file as an insider under Section 16. The company Secretary (or Associate/Assistant Secretary), General Counsel or legal department is usually involved in implementing corporate policies and procedures and for monitoring insider compliance. There are also many cases when the President, CEO, COO, CFO, Chairman of the Board, or Executive Vice President play some role in implementing the policies.
Reporting Assistance97% of respondent companies have procedures that standardize reporting by all insiders or otherwise assist them with Section 16 reporting. A wide variety of assistance is offered to insiders. The table below shows the most common types of assistance listed by respondents.
{Note: Companies frequently provide more than one type of assistance]. The Corporate Secretary, General Counsel or legal department play an important role in providing each type of assistance identified above. In 89% of the companies with established procedures, these officers/departments are involved in reviewing the forms before they are filed, and they actually file the forms in 91% of the companies. In addition, these officers/departments are also responsible for signing the forms for the insider (by power of attorney) in 152 companies. Finally, these officers/departments also send regular reminders (e.g., once a month/quarter) to encourage their insiders to file (20 respondent companies). Trading LimitationsPerhaps the most compelling evidence of corporate concern about Section 16 compliance is that 91% of respondent companies have placed limits on the trading activity of their insiders. The most common forms of these limitations are listed in the table below.
{Note: Some Companies may have more than one type of trading limitation]. Not only do 80% of the companies (i.e., 72% of all respondent companies) require their insiders to pre-clear their trades, but the CEO, President, COO, CFO, or Executive/Division VP is involved in pre-clearing trades in 18.4% of the companies. The involvement of high-ranking insiders is further evidence of how careful companies are in attempting to maintain some control over the trading activity of their insiders. (Of course these procedures may also help protect the insiders). 73.7% of respondent companies also have trading windows around earnings announcements. While the most common window is a relatively short period immediately after quarterly earnings announcements, there are many other trading windows used. One such trading window opens shortly after each quarterly earnings announcement and closes at the end (or near the end) of the last month of the quarter. There are also a variety of other trading windows based on trading days and or calendar days around earnings announcements, dividend announcements or board of directors meetings. (e.g., from the first trading day after the announcement of earnings announcements until 15 calendar days before the next board of directors meeting). In addition, many companies, including some with narrow trading windows, also have blackout periods. The most common explanation for these periods is that trading is restricted by the President, CEO or Chairman of the Board because there is material non-public information available to the insiders.
Conclusion and LimitationsThere is substantial debate in academia, in Congress and among regulators about the effectiveness of Section 16 regulations. However, prior to this study there was no significant academic evidence that investigates or reports the role that corporations themselves play in attempting to comply with these regulations. Furthermore, there was no large sample results that summarize the types of policies and procedures that companies have adopted to assist their insiders with reporting or to limit their trading activity. This survey clearly indicates that corporations are aware of their responsibilities under Section 16, that they usually adopt policies that assist insiders with their reporting, and that they frequently adopt trading policies that limit insiders' trading opportunities.The survey results are subject to the usual limitations. Given that the survey respondents are themselves insiders, the results are subject to self-reporting biases. Furthermore, the results of this survey may not be generalizable to non-member companies, since only ASCS member firms were surveyed. That is, it may be argued that member firms are much more likely than non-member firms to adopt the types of policies and procedures that are reported in this survey. Space does not permit a full exposition or analysis of the survey results. However, Professor Jeffrey Coles and Professor Michael Lemmon are working with me on an academic article that will provide a more complete and detailed analysis of the survey results. This article will be available to Society members in the next few months. In addition, many respondents to the survey were willing to identify their companies to enable the Society's National Office to construct a database of companies using each of the different trading restrictions and reporting practices identified in the survey. Blanca Rosbach in the National Office is currently compiling this data and will make it available to members only as soon as possible.
Pfizer's unique "poison pill" earns shareholder supportPfizer Inc. has proposed a unique solution to a dilemma that many corporations are facing these days - how to renew or establish a shareholder rights plan ("poison pill" ) without arousing serious objections or shareholder proposals from the company's large institutional investors. (In fact, according to a report by Securities Data Company, as many as 330 poison pill will come up for renewal in the next two years.) Pfizer calls its new approach to the pill the "TIDE Plan." The letters stand for "Three-year Independent Director Evaluation." Pfizer Vice President, Corporate Governance Terence Gallagher, a former Society director, says the TIDE Plan is designed to address key issues that investors have with the structure of most poison pills. These issues include: fear of management entrenchment and the need for accountability and oversight, director independence, director credibility and investor dialogue and input. Here are the key terms of the TIDE Plan:
Pfizer has been testing the market with its TIDE Plan and has been getting positive feedback. Ken West of TIAA-CREF, quoted in a recent issue of Director's Alert, noted that while his group believes that all rights plans should be put to a vote, it will probably support Pfizer's plan "because we support their board. They have good corporate governance." Gallagher adds that "with studies demonstrating the value of poison pills to shareholders and the periodic review of pills by an independent board committee, the activist community should modify its guidelines to place its trust in its director representatives when faced with a change-in-control bid. This modification would be an important step for activist shareholders to recognize that they have achieved their goals in those companies with an effective board."
Promotions and New Positions
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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Barnickol, a member since 1980, is the newly appointed Senior Vice President, Secretary and General Counsel of an as-yet-unnamed chemical company spinoff of Monsanto Company in St. Louis. In addition to chairing the Securities Law Committee from 1992-95, he has been a frequent speaker at Society seminars on securities law issues. He is also a former president and advisory committee member of the St. Louis Chapter. 
The Saturday evening gala at this year's National Conference will take on added glamor by being set in the JFK Library & Museum overlooking Boston Harbor. The museum has been in the news lately since opening a new exhibit of photos and memorabilia tracing the life of Jacqueline Kennedy Onassis. Conference attendees will have an opportunity to tour the new exhibit, relive some modern history and share an evening of fun and entertainment with Society friends.
