þ GLOBAL PROXY WATCH™
Vol VI No 15 The Newsletter of
International Corporate Governance and Shareowner Value
á Hot
Climate change headed to investor
mainstream in US and
How corporations position themselves on climate change is set to
become a focus of mainstream investor activism. In one breakthrough initiative,
big institutions in
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.