The Corporate Monitoring Newsletter
Issue #18 - April 2004
Written by Mark Latham
IN THIS ISSUE:
1. Shareowner Proposals in Four Company Proxies
2. SEC Nixes Auditor Elections
3. Unique Political Reform Process in British Columbia, Canada _________________________________________________________________
1. SHAREOWNER PROPOSALS IN FOUR COMPANY PROXIES
The CorporateMonitoring Project’s proposals are now in the proxies of four companies – the Voting Leverage Proposal at Visteon [VC] and Calpine [CPN], and the Proxy Advisor Proposal at Oregon Steel [OS] and USEC [USU]. Shareowners are voting on them until the annual meeting dates later in April and May.
This is the first time the Voting Leverage Proposal has ever appeared in a proxy. It aims to give individual shareowners a convenient alternative to following the board of directors’ voting recommendations. Given most individuals’ lack of time and expertise, professional recommendations can sway many votes. The proposal asks for a study and report on the feasibility of offering a convenient mechanism for individuals to copy the voting decisions of institutional investors. See “Vote Your Stock” at www.corpmon.com/publications.htm for more on this idea.
The Proxy Advisor Proposal has been the Corporate Monitoring Project’s flagship proposal since 1999. It would solve the free- rider problem that now discourages all shareowners (institutional and individual) from spending time and money on proxy voting research. If we pay for this research with our commonly-owned corporate funds instead of paying one investor at a time, we could get higher quality research and make it available to all shareowners. To keep the research independent of management, shareowners would vote to choose which research organization(s) to hire.
See www.corpmon.com for details: text of proposals, annual meeting dates and locations, links to proxies, board critiques of proposals and proponent responses. _________________________________________________________________
2. SEC NIXES AUDITOR ELECTIONS
The U.S. Securities and Exchange Commission continues to oppose letting shareowners even consider the possibility of choosing a company’s auditor by vote. By SEC no-action letters on January 23 and 28, management of USG Corporation [USG] and HRPT Properties [HRP] were allowed to omit our Auditor Independence Proposal from those companies’ proxies. As a result, most shareowners will remain unaware of this proposal.
Auditors chosen by the board tend to act in the interests of the board. Auditors chosen by shareowners would be more loyal to shareowners, resulting in more critical and revealing audits. However, the SEC considers auditor selection to be an “ordinary business” matter, too complex for shareowners to consider.
Yet voting for auditors is less complex than voting for directors, because shareowners could base their decisions on brand reputation of auditors in the eyes of the financial community. There are too many directors (thousands) for brand reputation to be effective in director elections.
See www.corpmon.com for text of the Auditor Independence Proposal. _________________________________________________________________
3. UNIQUE POLITICAL REFORM PROCESS IN BRITISH COLUMBIA, CANADA
Corporate governance and civic political governance have close parallels and cross-linkages. Here is a particularly relevant news item from civic politics:
We cannot entrust political reform to politicians. Anyone elected in the current system will be biased against changing that system. Instead, British Columbia’s political reform process is being carried out by 160 randomly selected citizens. How did this come about?
Like the year-2000 USA presidential election, the 1996 election for B.C.’s Legislative Assembly was a close race that highlighted shortcomings of the existing electoral system. Liberal party candidates got more votes in aggregate than New Democratic Party (NDP) candidates, but the NDP got more seats in the legislature than the Liberals. You can guess which party squawked over that one!
So the Liberals made electoral reform part of their platform in the subsequent (2001) election, which they won by a landslide. While there were other reasons for that victory, I hope John Kerry is taking notes here.
Figuring B.C. voters were too smart to entrust political reform to politicians, the Liberals promised to hand over the process to a ”Citizens’ Assembly” of randomly selected British Columbians. These 160 citizens are being paid to meet regularly during 2004 and carry out three phases: - learning about various electoral systems; - public hearings to get input from fellow citizens; - deliberation on whether and how to recommend changing the system.
Attending as an observer, I’ve been impressed with the assembly’s diligence, intelligence and independence. My guess is they will end up recommending that B.C.’s current “first past the post” electoral system be replaced with something more proportional like Ireland’s Single Transfereable Vote system or New Zealand’s Mixed Member Proportional system. B.C. voters will then accept or reject the proposed change in a May 2005 referendum.
See www.citizensassembly.bc.ca/public for more info.
I expect the B.C. Citizens’ Assembly’s biggest impact will lie not in this particular political reform, but rather in setting a precedent for how to carry out political reform. Hats off to Gordon Gibson for designing the process (www.fraserinstitute.ca/shared/author.asp?id=72).
Speaking of reform, one could likewise point out that professionals in the proxy voting business are biased against restructuring the proxy voting business.
Back to newsletter list |