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þ                  GLOBAL PROXY WATCH

 

 

     Vol VI No 15       The Newsletter of International Corporate Governance and Shareowner Value       April 12 2002

 


á  Hot

Climate change headed to investor mainstream in US and Europe

How corporations position themselves on climate change is set to become a focus of mainstream investor activism. In one breakthrough initiative, big institutions in Europe and North America are about to prod large-cap companies to disclose more environmental data. And on the annual meeting front, dissident shareowner resolutions on climate change are proving the fastest growing category of challenges to US management. Investors will vote on some 18 proposals at companies this year compared to just seven in 2001, according to a new report.

F   Come Clean. Late next month a coalition of fund managers and retirement plans from North America and Europe will send a joint letter to 500 of the world’s largest listed corporations asking for information on their greenhouse gas emissions. The Carbon Disclosure Project (CDP), two years in quiet gestation, is funded to the tune of US$250,000 by seven foundations. Backers want a hard-nosed investment analysis to probe risks and opportunities as climate change science, policy and consumer sentiment evolve. CDP has hired Innovest Strategic Value Advisers to produce an analysis of responses for public release next February. CDP’s website—www.cdproject.net—will open June 5. The data-gathering complements work of the Institutional Investors Group on Climate Change, founded last year by Universities Superannuation Scheme (GPW Dec. 21 2001). Members are developing best practice ideas for shareowner engagement on climate change. Baillie Gifford & Co., the Edinburgh-based fund manager, is coordinating CDP recruitment of fund signatories. Contact colin.melvin@bailliegifford.com.

F   Proxy Climate. In three markets, energy companies are serving as lightening rods for AGM shareowner activism in 2002. Loudest pressures are mounting in the US at ExxonMobil’s May 29 annual meeting. The firm has flaunted its rejection of climate change concerns. Chairman and CEO Lee Raymond slammed European emissions control regulations in a recent Financial Times interview, virtually goading critics to take the giant on. They are, in two proposals. Next Thursday, shareholders at BP will also cast ballots on a dissident resolution, this one asking for a report on how management gauges environmental risk. But discussion is civil, as BP has taken pains to maintain communication with investors and stressed investment in sustainable energies. In France, the May 7 meeting of TotalFinaElf may see three rare resolutions filed by the employee shareholder group AVAS. Proposals call for a majority of independents on the board audit committee, better audits, and greater detail on the link between stock options and performance. Dissent stems in part from distrust of the company’s environmental record.

 

 

þ Vacuum

Key figures set board exit, thrusting CalPERS into leadership struggle

Twin departures have suddenly set US corporate governance pacesetter CalPERS on course for it’s most profound board transition in a decade. William Crist, president since 1992, decided last week not to run for re-election. So did Michael Flaherman, who has chaired the US$150 billion state retirement fund’s powerful Investment Committee for two years. The surprise exits put CalPERS leadership in doubt just as the fund was trying to pilot US investor policies on the Enron debacle.

Crist and Flaherman faced easy campaigns in the two-month period during which members vote for select board members. Crist has been an influential advocate of shareowner activism, and an indispensable arbitrator in an increasingly fractured board. After 15 years at CalPERS, he may simply have had enough. Flaherman shepherded CalPERS away from indexing and toward socially responsible investment strategies. Observers saw him being groomed as Crist’s successor. But Flaherman now aims for a private sector job before running for California office.

With both now lame ducks, CalPERS enters a divisive and drawn out leadership vacuum. Some potential presidential candidates—such as state treasurer Phil Angelides—could take the fund into higher profile, and more political, positions. Or board member Sean Harrigan could identify the fund more closely with trade union stances. Others could tone down activism. Either way, expect board squabbles and staff turnover before a new leadership solidifies. That won’t happen for a year. Nominations closed April 2, but voting for open board seats won’t take place until August and September. Results are announced in October, and new members don’t join until January 15. Jockeying over who gets the presidency and committee chairs may not end until March 2003. The transition could hobble CalPERS’ plans to convene ambitious Enron-inspired taskforces to guide national corporate governance reform (GPW Feb. 22 2002).

 

 

þ Briefings

?   No Rule. Forget any overhaul in French proxy voting for the 2002 annual meeting season. The latest: needed now-you-see-it, now-you-don’t regulations are due from the Conseil d’État by April 30, with publication around May 15. That’s exactly one year since enabling legislation was passed. And results will come too late for companies to alter procedures for upcoming meetings. Civil servants feared making any decision—no matter how technical—that could trigger controversy in the presidential election. At issue are antiquated statutes that restrict custodians from voting on behalf of clients, allow companies to bar ballots unless proxy cards contain signatures from ultimate owners, and require freezes on stock trading to vote most shares. The new decrees, though contentious, should abolish freezes, provide a way for intermediaries to vote, and modernize signature requirements (GPW Feb. 22 2002). But bad old rules will stay around this year, keeping it tough for foreign investors to vote.

G    Way Ahead. The best US response to Enron, more market players believe, is a single national code of corporate governance best practice for the United States. None now exists. But who would write it? Weil, Gotshal’s Ira Millstein and public policy guru John C. Whitehead last week submitted ideas for legislation to the Senate Banking Committee. They propose creating a standing, federally funded, nine-person Corporate Governance Conduct Board. The Securities and Exchange Commission would nominate a chairman to be approved by the Senate. Members would all come from the private sector. The Board would develop a national US code, and the SEC would compel listed companies to disclose annually how they comply, or why they don’t. Pioneered in 1992 by the UK’s Cadbury Committee, such “soft regulation” is now common in many markets. Expect it now to top investors’ post-Enron wish lists for US reform. Obtain a copy of the April 2 Millstein-Whitehead memorandum from jane.pollack@weil.com.

þ   LAN. Corporate directors throughout Latin America are about to get first-ever access to training and resources to boost board professionalism. At a Sunday conclave in Mexico City representatives from five markets formed a new Network of Institutes of Corporate Governance. Brazil already has a national body. Its Instituto Brasileiro de Governança Corporativa wrote governance principles and boasts a growing curriculum in director education. The Global Corporate Governance Forum and the International Finance Corp. (IFC) are now acting as midwives to promote similar groups in the continent and link them together. Markets are responding. Groups came to the Mexico City meeting with a proposal for an Argentine Institute for the Governance of Organizations. Colombia’s intrepid Confecamaras announced plans for a new Center for Corporate Governance. Mexico’s business association said it wants to set up a Council of Corporate Governance. And groups in Chile are discussing a similar center. The Forum and IFC hope to help the new bodies with technical aid from the US National Association of Corporate Directors and McKinsey & Co., which drew up a boilerplate business plan for creating viable institutes. The Latin American Network is modeled on IDEA.net, which links together institutes of directors in East Asia (GPW Dec. 8 2000). Groups share resources.

?   Milan Online. Find program details on the web for the July 10-12 2002 annual conference of the International Corporate Governance Network (ICGN), set for Milan. “Companies as Citizens” is the theme. But expect fallout from Enron to dominate discussions. Eight-year old ICGN, led by institutional investors representing more than US$10 trillion in assets, is the main global market-based body focusing on corporate governance. The Borsa Italiana is hosting the event, which could draw more than 400. Speakers from 13 countries will spotlight fund and board governance, EU regulation and social investing. Milberg Weiss’s Bill Lerach, lead plaintiff in the Enron case, will brief delegates on legal outlets available to minority investors. Keynoters include Fiat head Paolo Fresco, TIAA-CREF chief John Biggs and Alastair Ross Goobey, chair of Hermes Focus Asset Management. Following the conference, the ICGN annual meeting will debate taking action on topics such as executive pay, stock option accounting and ADR voting rights. The 2002 conference fee is €600 for members or €840 for non-members, if booked by May 15. Otherwise, fees rise to €720 for members or €960 for non-members. Registration and hotel forms are to be posted at www.icgn.org in the next few days.