AC Alert for February 14, 2012 About Those Upcoming Elections -- When Shareholders Speak AC Alert for February 14, 2012 About Those Upcoming Elections -- When Shareholders Speak

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Wednesday, February 15, 2012 - 3:00pm

AC Alert for February 14, 2012
About Those Upcoming Elections -- When Shareholders Speak

There's probably not a soul left in America who hasn't heard or read about the various political caucuses, debates and primaries -- and elections -- coming up this year. The news media is just filled with reports, editorials, commentaries and analysis every day, to the point where it has become "a bit" overdone. Here at AC, we also have our eyes focused on this year's upcoming elections, but probably not the ones you are thinking of.

We're focused on the 2012 Proxy Season, with publicly-traded companies holding their annual shareholder meetings. This annual corporate electoral process really heats up in the spring months and is usually a period of intense communication for shareowners with listed companies in their portfolios.

Many experts think that the proxy resolution campaigns waged by shareowners signal breakdown or failure of shareowner-corporate communications and company-stakeholder engagement.  When constructive engagement fails, shareholder campaigns often follow. Based on recent news reports, it appears that some of these campaigns have already begun:

Notes The Motley Fool:  "The 2012 proxy season is already gearing up to be a busy one. One powerful shareholder is taking on some of the biggest companies on issues that cause corporate dysfunction and increase the chance of declining shareholder value. The American Federation of State, County, and Municipal Employees' AFL-CIO Employees Pension Plan is filing shareholder proposals at 21 major companies. These proposals aim to increase director accountability and independent corporate board leadership, as well as foster greater transparency at the targeted corporations.”

Propositions touch on some of the most important factors in encouraging solid, shareholder-friendly corporate governance policies at public companies in the U.S.

AFSCME's notion that one of its 2012 resolutions is to take on imperial CEOs is familiar to anyone who closely follows corporate governance issues. For investors focused on corporate governance issues, director independence is a simple, logical way to foster more robust boards of directors, and separating the chairman and CEO roles acknowledges the fact that a chief executive officer isn't an emperor; he or she is in fact an employee.

These high-ranking employees answer to shareholders, and more directly, to the directors who are charged with the responsibility of keeping an eye on management and looking out for shareholder interests. AFSCME is calling for independent chairs at nine public companies, including JPMorgan Chase and Goldman Sachs. (Source: Motley Fool)

There are perennial governance and social issue questions which crop up each year at proxy time, along with some new emerging issues. The weapons in the arsenal of the activist shareowners include the filing of shareowner-sponsored resolutions, public communications and media campaigns, coalition building with allied investors and invitation of support by third-party issue advocates. Some issues we're likely to see this year include:  transparency on political contributions, executive pay, policies and behavior in global supply chains, human rights, labor rights, diversity, treatment of indigenous peoples, forestry and land management, environmental management, preservation of natural resources, frequency of say-on-pay disclosure, energy conservation, water use and water waste, majority voting, and climate change risk.

As the political races heat up, shareholders are asking pointed questions of corporate executives and boards:  How are you spending the company’s money this year on SuperPacs, political donations, contributions to trade association lobbying and the like.

These are the dimensions of corporate activities very much in focus for shareowners and the asset managers as the 2012 corporate proxy season gets underway. Here at AC, we work to capture all the news about the Proxy Season in our special Hot Topics section -- "2012 Proxy Season: Shareholders Speak Out." Here are some recent excerpts:

AT&T shareholders demand answers
(Source: Politico) Some AT&T shareholders want more than just dollars and cents from the board of directors in the aftermath of the company’s aborted takeover of T-Mobile: They want to know how company money is being spent to influence politics.

Widespread SEC Disclosure Noncompliance Triggered by Material ESG Issues
(Source: Marketwatch) Widespread corporate noncompliance with SEC requirements triggered by material ESG issues may cause many SEC filings to be materially misleading, inaccurate, or even fraudulent, according to a study conducted by CSR Insight. The study found a substantial likelihood of widespread corporate noncompliance with one or more SEC requirements, due in major part to the inadequacies of most current enterprise software systems.

The Interfaith Center on Corporate Responsibility Issues 2012 Proxy Resolutions and Voting Guide
(Source: PR Newswire) The Interfaith Center on Corporate Responsibility (ICCR) has released their 2012 Proxy Resolutions and Voting Guide including all member-sponsored shareholder proposals for the upcoming proxy season. The Guide features 160 resolutions filed at 115 companies by ICCR members for 2012. Resolutions address investor concerns around human rights and supply chain accountability, financial practices and risk, health care, food and water sustainability, environmental health and corporate governance.

Corporate Governance: proxy advisory guidelines and the shifting landscape of benchmarking executive compensation
(Source: Reuters) The SEC’s compensation disclosure regulations and recent updates from proxy advisory firms’ guidelines indicate that executive compensation will remain a key issue in this year's proxy votes. Companies need to exercise great care when considering executive compensation policies.

CalPERS Calls on Apple to Adopt Majority Vote Proposal for Board Seats
(Source: CalPERS) The California Public Employees’ Retirement System (CalPERS) is seeking shareowner support for its proposal to have unopposed board candidates of Apple elected by majority vote. CalPERS proposal, to be considered at Apple’s February 23 annual meeting calls on the company to require that candidates for uncontested seats receive a majority of votes cast to be elected to the Board of Directors. More than 73 percent of shareowners voting their shares approved a similar CalPERS-backed proposal at Apple’s 2011 annual meeting, but the company’s Board so far has declined to adopt it.

Public company control alert: NYSE acts to further limit broker votes on specified corporate governance proposals
(Source: Lexology) The New York Stock Exchange has issued an information memo to its member organizations stating that effective immediately, brokers may not vote on corporate governance proposals supported by company management without instructions from their clients. NYSE’s rules affect the voting of all shares held in “street name” by NYSE member organizations, regardless of whether the vote is for an issuer listed on the NYSE.


Political-Spending Disclosure Plans Could Have Hidden Costs
(Source: Forbes) Staff writer Daniel Fisher notes that ISS, the leading adviser on corporate-governance proposals, changed its policy to recommend shareholders generally vote in favor of proxy proposals to disclose corporate political activities. These proposals often come from unions and other organizations with their own agendas, and may impose unforeseen costs on companies.

AC editors will continue to monitor and present news, commentary and research surrounding contests in the proxy arena in our Hot Topics Section. For your convenience, we have also archived the 2008, 2009, 2010, and 2011 proxy seasons content for easy retrieval.  All years are searchable in AC.  We also invite your comments. Please feel free to share your views with others interested in the corporate proxy season and the issues in the headlines. Send your comments to .

This is just a sampling of the information in our Alert. Go here for the full text of this alert, and more information on Sustainability, and other Accountability related topics.