May 9 2008

“Rebel” shareholders may force a vote on the controversial appointment of Marks & Spencer CEO Stuart Rose the position of Chairman. The other side of the coin across the Atlantic, as troubled Wachovia Corp’s CEO gives up the Chairman title. See further coverage here. Argument that “CEOs aren’t overpaid” put forth here.  On “say on pay” after the Aflac AGM, and further evidence that the movement is “losing steam”.

May 2 2008

With the US’s first “Say on Pay” vote coming up this Monday May 5 (at Aflac’s AGM), a RiskMetrics study actually shows less support in 2008 for “Say on Pay” resolutions:  “‘There’s a mixed view…’ argues Prof. Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. ‘I think there are some concerns about its efficacy and impact. It’s a half-step.’ Elson asserts that other mechanisms, such as corporate reimbursement for proxy solicitation expenses, are ultimately more effective tools for shareholders to curb pay and other governance abuses.” Along those lines, on increasing demand for independent compensation consultation.

Lots of coverage on the death of UK Corporate Governance expert Derek Higgs. From The Telegraph: “In the wake of American corporate scandals such as Enron and Worldcom, Higgs was charged by the government in 2002 with examining the British corporate landscape and spotting weaknesses that could make executive abuse more likely. More specifically, he was asked to make recommendations on how to make non-executive directors more effective. His report, published in January the following year, began with a pointedly ironic quote from Walter Bagehot on the monarchy – “We must not let in daylight upon the magic” – and insisted that corporate Britain should do just that.”

Jeremy Warner notes that Higgs’ Code of Conduct on Corporate Goverance has never been more relevant than in our current economic situation. “Ah, but it didn’t prevent the avarice-driven madness of bankers or the collapse of Northern Rock, some will say. Maybe not, but think of how much worse it might have been with no constraints on the chief executive at all. “

April 25 2008

On the rise of majority voting measures: “Voluntarily embraced governance practices tend to avoid the complexity and arbitrary thresholds and requirements that imposed rules entail (and, in turn, the disputes that such rules and thresholds generate or the fact that their inherent arbitrariness detracts from their credibility).” In anticipation of high-profile AGMs in Nova Scotia over the next few weeks: “With several of the companies reporting a decrease in share value during 2007, analysts suggest investors may voice their displeasure not only about strategy, but also the hefty paycheques some executives are banking.” On Directors’ role in the precipitation of corporate greed: “It threatens to shove the whole world into a severe economic downturn, but not to alter in the slightest the happy state of those fabulously overpaid CEOs.”

And on the heights of Frank Stronach’s pay package: “At time when another Canadian titan sits in a U.S. prison for using a business as his “personal piggy bank” and there is a higher level of scrutiny on governance issues, it’s worth asking… if he’s really providing $70 million in value to shareholders.”

Finally, questions of independence, as Marks & Spencer much-scrutinized-of-late Chair/CEO is revealed as having invested in the business of a nominally independent M&S Director (and a member of the Compensation Committee).

Things on the Proxy Front

We’re not yet in the thick of our summer research project (whose results will appear this fall as Rotman’s “Board Shareholder Confidence Index” and Report on Business‘ “Board Games”), but our early research has pointed towards some interesting trends.

• Bank of Montreal and the Bank of Nova Scotia have both included “Areas of Expertise” with their Director biographies this year, this being particularly notable considering recent emphasis upon board accountability
• A tendency towards decreased dilution by a range of companies
• Majority voting policies continue to be adopted, and we’ve seen this already this year by Laurentian Bank of Canada and MDS Inc.
• Increased disclosure of Director information including ages and total value of equity holdings.

April 17 2008

On US activist shareholders after a Director resignation at beleaguered Washington Mutual: “This renewed focus on board accountability isn’t likely to die out anytime soon. Indeed, corporate boards that have been targeted by activist campaigns should be prepared for a tough fight.” At their AGM, a shareholder proposal to separate the Chair and CEO roles won 51% of the vote. Pressure on UK’s Marks & Spencer to compromise on their recent corporate overhaul. On Directors’ increasing clout in setting CEO Compensation. And US Labour Unions assert that CEO pay played a role in the mortgage crisis. New survey shows that most executives think that CEOs are overpaid and underperforming.

April 11 2008

On new “Say on Pay” pressure from institutional shareholders: ” ‘This isn’t an attack on companies in general… This is good governance, just like ratification of auditors or majority vote for directors.’” More from The New York Times: regarding say on pay as ”a stopgap” for shareholders, short of their having the power to nominate an independent slate of Directors who would do the job properly.

In light of the credit crisis, shareholders are urged by proxy voting services to vote against various Directors of affected companies– though these efforts came up short in practice. More from The Financial Times: “Institutional investors point to a lack of risk management expertise, not poor oversight.”

April 4 2008

On UK corporate governance: columnist Jeremy Warner on the trend of adjusting executive bonus performance targets in light of economic downturn (“How reassuring it is that though the cost of your mortgage may be going through the roof, those providing it are to be be fully insulated from the pain”) and also on Marks & Spencer’s recent Chair/CEO combination (“Yet, in a curious way, the episode may have enhanced good corporate governance at M&S… the board will be doubly careful to ensure best practice[now], or at least one would hope so”). The Guardian cites dangerous precedent however, for such breaches of corporate governance regulations leading to poor performance. On M&S’ “shareholder ire” for the breach and the company’s failure to provide proper explanation.

New defensive provisions by US companies Sara Lee and Coach requiring those shareholders making proposals to disclose whether their share ownership is hedged. Japanese version of Sarbanes-Oxley Act comes into force on April 1. Report on Business‘ Janet McFarland on ”personality profiles and board dynamics”.

March 24 2008

Upcoming AGMs to watch in the US in regards in shareholder activism: “Will management win out? Will directors get booted? Can activists win out? One certainty: There will be blood.” More on “say-on-pay”. From Report on Business, could excecutive pay packages be fueling “high risk business practices that are toppling giants today”? In Germany, shareholders claim a ”rare victory”.

March 17 2008

Some governance issues in the news: more coverage of Marks & Spencer’s recent controversial move to combine the roles of their CEO and Chair– major shareholders are calling the change “unwelcome”. On the need for continued vigilance to ensure executive compensation is under control in Canada, particularly in light of the subprime mortgage problems in the US.

March 11 2007

So the CCBE Blog returns to life after a hiatus. And what have we been doing in the meantime? Preliminary research has begun into the corporate governance of small and medium-sized enterprises (SMEs), and we’ve started work on our regular TSX Composite Index as proxy season gets underway.

Along those lines, check out the Risk Metrics’ Blog’s 2008 Proxy Preview, focusing on proposals for advisory vote (“say on pay”) measures, among other considerations pertaining to executive compensation. After the CIBC Annual meeting in late February, The Financial Post on the rejection of the “say on pay” proposal, reporting that advocates still claimed victory in the fight to give investors a voice in how much executives are paid.

In Britain, the elevation of Marks & Spencer CEO to Chair makes shareholders uneasy and breaches City corporate governance codes. Study shows companies with good governance outperforming those with the worst. On the growth of the corporate governance movement, and the resulting economic boost: “‘You need some level of governance, and only then will investors come in… And when investors come in, they demand better disclosure and transparency. It feeds on itself.’” And the Wall Street fallout from Spitzer scandal.