For Immediate Release
Tuesday, July 15, 2003
AFSCME Pension Plan Concludes Successful Proxy Season, Applauds SEC Staff Recommendations
The AFSCME Employees Pension Plan concluded its most successful proxy season ever with today's announcement that the Securities and Exchange Commission (SEC) staff has recommended new rules allowing shareholder nominated directors to stand for election on company proxy materials. The recommendations announced today will open the door to real shareholder democracy by calling for new election procedures that grant shareholders access to the company proxy card to nominate their own slate of minority directors.
Although the AFSCME Pension Plan's proxy access proposals were the cornerstone of its shareholder activity over the last six months, six of the Plan's other proposals received majority votes and two additional companies implemented reforms requested by the Plan. The signature effort of AFSCME's Pension Plan fund this season were three binding and three advisory resolutions calling on companies to allow a shareholder or group of shareholders owning three percent or more of a company to nominate a director to be placed on the company proxy card.
Two of these proposals, at Citigroup (NYSE: C), binding, and AOL-TimeWarner (NYSE: AOL), advisory, quickly became the focus of a contentious "no action" process. The SEC staff issued an opinion allowing companies to omit the AFSCME proposals. AFSCME appealed the staff opinion to the full Commission, which decided not to overturn the staff's recommendations, but requested that the Division of Corporate Finance study the issue and make recommendations on reforming the director nominations process by July 15, which culminated in today's recommendations.
AFSCME Plan Chair Gerald W. McEntee said, "The proposed rulemaking is a major step toward leveling the balance of power between shareholders and directors. We applaud the work of the SEC staff and look forward to working with the Commissioners to improve upon the recommendations. The report establishes the precedence that we were looking to create when we filed our proxy access proposals."
"There is an urgent need for shareholder democracy. We urge the Commissioners to quickly institute measures that allow access to the proxy, and have the new rules in place in time for the 2004 proxy season," McEntee said. McEntee is also president of the American Federation of State, County and Municipal Employees, the nation's largest public service union with 1.4 million members.
"Shareholder votes this season, along with the SEC's recent recommendations, will echo across the boardrooms of Corporate America. And we will continue to aggressively support initiatives that will give shareholders a voice in corporate governance reform," McEntee added.
AFSCME members participate in public employee pension funds with assets of over $1 trillion. The AFSCME Employees Pension Plan is a separate pension fund maintained for AFSCME staff.
Results of 2003 AFSCME Employees' Pension Plan Proposals
Reincorporation
The AFSCME Plan sponsored proposals to restore investor confidence by having companies reincorporate in the United States from tax haven countries with weak shareholder rights. A broad coalition of public pension systems including CalPERS, CalSTERS, New York State Common Funds, the Funds of New York City and the State of Connecticut Retirement Funds and Trust backed this first time effort.
- Sending a strong a message to corporate leaders 41.4 percent of shareholders voted in favor of the proposal at Ingersoll-Rand Company Ltd. (NYSE: IR).
- 26.4 percent shareholders at Tyco International (NYSE: TYC) voted for the proposal, leading the Tyco board led by newly elected director H. Carl McCall to agree to study the issue and report back to the proposal proponents by October.
- A similar proposal at McDermott International (NYSE: MDR) was withdrawn after the company agreed to review the costs of reincorporating and put it to a shareholder vote after it emerges from bankruptcy.
Executive Pay
A first-time proposal filed by the AFSCME Plan urged boards to require a holding period for stock options after top executives exercised them.
- A 52.1 percent majority of shareholders voted in favor of the proposal at MBNA Corp. (NYSE: GTU)
- The proposals received 47.8 percent of the votes at PeopleSoft (NASDAQ:PSFT).
- At UnitedHealth Care (NYSE: UNH) the proposal received 42.8 percent.
- Siebel Systems (NASDAQ: SEBL), notorious for its abusive use of options, had support from the majority of shareholders independent of the company gaining 35 percent of the vote.
- Adobe Systems (NASDAQ: ADBE) responded to the proposal with a weak requirement that 25 percent of the options be held for a two-year period. 9.7 percent voted for the stronger AFSCME Plan submission requiring that 75 percent be held for the full employment tenure of the corporate officer. A similar proposal at Gateway (NYSE: GTW) received 12.2 percent of the vote.
Corporate Governance
The AFSCME Plan introduced several different corporate governance proposals.
- AFSCME Plan proposals received majority votes to rescind poison pills at Circuit City Stores (NYSE: CC) 79 percent, Pitney Bowes (NYSE: PBI) N/A and Ryder Systems (NYSE: R) 75.5 percent.
- As a result of strong support for an AFSCME proposal calling for declassifying their board, Great Lakes Chemical (NYSE: GLK) put a binding management proposal before the shareholders to amend the bylaws to hold annual elections. The proposal was enacted with 89 percent of the outstanding shares.
Shareholder's Rights
The AFSCME Plan introduced proposals to protect and increase shareholder's rights.
- The AFSCME plan's binding resolution at Kroger (NYSE: KR) to establish a board committee including shareholders whose initiatives win a majority votes that are not adopted by the company - survived a no action move before the SEC. Shareholders responded in high numbers to this innovative proposal with a near-majority of 47 percent of votes cast.
- A proposal at Electronic Data Systems (NYSE: EDS) for a shareholder vote on golden parachutes was agreed to by the company and was withdrawn.
- Shareholders at Waste Management (NYSE: WMI) and at Allied Waste (NYSE: AW) voted on AFSCME plan proposals asking the company to report on the impact that anti privatization initiatives where having on their municipal trash business. Waste Management and Allied Waste proposals received votes of 4.2 percent and 6.5 percent.
