For Immediate Release
Tuesday, November 26, 2002
AFSCME Calls for Increased Activism, Details Proxy Access Campaign to Public Pension Funds
Washington, DC —The American Federation of State, County and Municipal Employees (AFSCME), AFL-CIO, today called on public employee pension funds to increase their level of activism immediately in response to a scandal-filled year on Wall Street. In a letter to 150 public employee pension funds, which collectively hold more than $1 trillion in assets, AFSCME President Gerald W. McEntee urged support for initiatives that would give shareholders access to corporate proxy statements in order to enhance their power to nominate and elect directors of their own choosing.
"Excessive executive compensation, manipulated earnings, numerous accounting irregularities and the other scandals that have surfaced in the past year are just symptoms of the larger problem: shareholders have no real voice in the make up of corporate boards. Our proposals aim to change that," McEntee said.
McEntee, who is also chairman of the AFSCME Employees Pension Plan, released a list of 22 companies to whom the Plan has submitted shareholder proposals for 2003 annual meetings, more than tripling the union's 2002 effort (see attachment for complete list). In addition to enhanced shareholder proxy access, the activist fund seeks corporate governance reforms in the areas of executive compensation, reincorporation from tax haven countries, corporate governance reform and strategic planning.
The AFSCME Plan will put its strongest effort behind proposals seeking shareholder access to the proxy ballot for the purpose of nominating independent board members. The proposals, half of which are in the form of binding amendments to company bylaws, would:
- Require inclusion on a company's proxy statement and proxy card the name of one board candidate if nominated by shareholders owning at least three percent of company stock;
- Allow for up to a 500-word background statement on the nominee; and
- Require the nominating shareholders to obey all relevant securities regulations and indemnify the corporation for any failure to comply.
Bylaw amending proposals for proxy access have been filed at Citigroup (NYSE: C), Sears (NYSE: S) and Exxon-Mobil (NYSE: OXM). Non-binding resolutions urging boards to adopt such changes have also been filed at AOL-TimeWarner (NYSE: AOL), Kodak (NYSE: EK) and the Bank of New York (NYSE: BK). Other companies targeted for action include Adobe Systems (NASDAQ: ADBE), Allied Waste (NYSE:AW), Bausch & Lomb (NYSE: BOL), Circuit City (NYSE: CC), Electronic Data Systems (NYSE: EDS), Gateway (NYSE: GTU), Ingersoll-Rand Co. Ltd. (NYSE: IR), McDermott International (NYSE: MDR), MBNA Corp. (NYSE: KRB), PeopleSoft (NASDAQ: PSFT), Pitney Bowes (NYSE: PBI), Ryder Systems (NYSE: R), Siebel Systems (NASDAQ: SEBL), Tyco International (NYSE: TYC), UnitedHealth Care (NYSE: UNH), and Waste Management (NYSE: WMI).
2003 AFSCME Employees' Pension Plan Proposals
Proxy Access
Shareholder access to the proxy ballot for purpose of nominating an independent board member is a potent mechanism for shareholders who have become frustrated by the lack of meaningful ways to participate in director selection. The AFSCME Plan has filed binding amendments to change company bylaws to allow for proxy access at Citigroup, Inc., Sears, Roebuck & Co., and Exxon Mobil Corporation and resolutions urging boards to adopt such changes at AOL TimeWarner, Eastman Kodak Company and the Bank of New York, Inc. AFSCME proposes that a shareholder or group of shareholders owning at least 3 percent of the company would have the right to have its nominee for director appear on company's proxy card and have a 500 word statement about the nominee be included in a company's proxy statement.
Executive Pay
The AFSCME Plan has submitted a total of seven proposals on executive pay. Four of these resolutions urging that options be expensed have been submitted to MBNA, Inc., Siebel Systems, Inc., United Health Group Inc. and PeopleSoft Inc. Proposals urging the board to impose a holding period on stocks gained through compensation plans such as stock options were filed at Adobe Systems, Inc. and Gateway, Inc. At Electronic Data Systems Corp. the plan seeks to limit a huge golden parachute that would be triggered if a shareholder acquires a 15 per cent stake in the company.
Reincorporation
In response to corporate flight, the Plan filed proposals at the expatriate corporations Tyco International Ltd., Ingersoll-Rand Co. Ltd. and McDermott International, Inc. asking that each company reincorporate back to the United States. These companies created off-shore shell corporations in order to escape paying US taxes and reduce the legal rights of shareholders. The effort follows on the heals of a major shareholder victory this summer when StanleyWorks decided against reincorporating in Bermuda after an outcry from public pension funds and multi-employer plans called the move into question.
Business Strategy Reports
The Plan also has filed resolutions at Waste Management, Inc. and Allied Waste Industries, Inc. urging that they report on the effect measures to oppose privatization such as "living wage" laws and other provisions which limit the economic feasibility of privatization have on their business strategies. The first of these privatization proposals appeared on the 2002 Waste Management proxy after it had been submitted by the AFSCME fund and the Securities and Exchange Commission rejected a no-action request by the company.
Resubmissions on Corporate Governance Issues
Each of the following companies is receiving a shareholder proposal for at least the second time from the AFSCME Plan because the boards failed to implement the reforms supported by a majority of votes cast: Board Declassification proposal at Bausch & Lomb, Inc. (received 76.5 % of the vote in 2002) and proposals on Poison Pills at Circuit City Inc. (received 73.3 % of the vote in 2002), Pitney Bowes, Incorporated (received 53.2 % of the vote in 2001) and Ryder Systems, Inc. (received 72.8% of the vote in 2002, its fifth majority vote on the issue since 1990).
