For Immediate Release
Wednesday, January 28, 2004
AFSCME Files Proxy Board Accountability Proposals Seeking Continued Shareholder Momentum
The AFSCME Employees Pension Plan (AFSCME Plan) today outlined its shareholder program to hold Corporate America accountable to shareholders and released its list of shareholder proposals submitted for company annual meetings in spring 2004.
"Even after the implementation of Sarbanes-Oxley reforms, boardroom culture has been slow to change. The AFSCME Plan proposals are aimed at pushing individual directors - as well as boards - to be more responsive to investors. Excessive pay, ignored majority votes, and opaque board deliberations each reflect the lack of board accountability," said Gerald W. McEntee, Chairman of the AFSCME Employees Pension Plan.
The AFSCME Plan, submitted proposals at 21 companies (see attachment for complete list). Among the proposals, the Plan seeks disclosure of board agendas and non-unanimous director votes, increased responsiveness to shareholder majority votes, reincorporporation of expatriate companies from tax havens and more effective executive compensation programs.
The AFSCME Plan expands its activist corporate governance agenda with new proposals that would give shareholders the ability to assess director performance based on individual votes on non-confidential board and committee matters. Proposals filed at Time Warner (NYSE:TWX), ExxonMobil (NYSE:XOM) and McKesson (NYSE:MCK) ask the board to issue an annual report disclosing the agenda items that the board and its committees voted on and any director votes that were not unanimous. "Our goal is to provide shareholders meaningful data on which to evaluate directors, which we believe is the next logical step when shareholders have the right to nominate directors on the company proxy," added McEntee.
In another move to emphasize board accountability, the Plan has filed binding proposals at companies where majority votes on shareholder proposals have not been implemented by unresponsive boards. In 2003 only 13 of 166 majority votes were implement by boards according to the Council of Institutional Investors. For example, every year between 1999 and 2002, the Kroger (NYSE:KR) board ignored majority votes for board declassification. The binding bylaw amendment, which was submitted at Kroger, requires that a "Majority Vote Shareholder Committee" meet with shareholder proponents in the wake of any unimplemented majority vote. The amendment received over 47 percent of the votes cast at the 2003 annual meeting. Similar proposals have been filed at Merck (NYSE:MRK), Sears Roebuck (NYSE:S), and Eastman Kodak (NYSE:EK) where the directors continue to ignore shareholder wishes.
Non-binding proposals have been filed at Tyco (NYSE:TYC) and Ingersol Rand (NYSE:IR) asking that the companies reincorporate to the U.S. Other companies targeted for action include Adobe Systems (NASDAQ:ADBE), Allied Waste (NYSE:AW), Autodesk (NASDAQ:ADSK), Bank of New York (NYSE:BK), Bed Bath Beyond (NASDAQ:BBBY), Circuit City (NYSE:CC), Home Depot (NYSE:HD), MBNA (NYSE:KRB), PeopleSoft (NASDAQ:PSFT), Siebel Systems (NASDAQ:SEBL), UnitedHealth Group (NYSE:UNH), and Waste Management (NYSE:WMI).
2004 AFSCME Employees Pension Plan Shareholder Proposals
Board Accountability
The AFSCME plan has filed proposals at Time Warner, Exxon Mobil, and McKesson that ask the board to issue an annual report, which would disclose board and committee agenda items that are non-confidential/non proprietary and the votes on any items that are not unanimously supported. These reports would provide shareholders better transparency and accountability on board deliberations and create a tool for the evaluation of individual director performance.
Majority Votes
The AFSCME Plan has filed binding by-law amendments at Kroger, Merck, Sears Roebuck, and Eastman Kodak in response to companies that receive majority votes on shareholder proposals but then ignore the wishes of their shareholders. All of these companies have ignored multiple majority votes. The Plan proposals would amend each company's bylaws to require the creation of a board committee that would meet with shareholder proponents pursuant to any unimplemented majority vote. Last year the proposal received 47% of the vote at Kroger.
Executive Pay
In response to non-performance based pay and the excessive use of stock options, the Plan has filed proposals on option expensing, holding periods for exercised options, and performance vesting of restricted stock. Option expensing proposals were resubmitted at PeopleSoft, MBNA, Siebel Systems and UnitedHealth Group. Each of these proposals received large support last season including a majority vote at MBNA. A proposal urging the board to place a holding period for stocks sales after option exercises has been filed at Bed Bath Beyond and AutoDesk and refiled at Adobe Systems. A proposal that links the vesting of restricted stock awards to the achievement of performance goals as been filed at Home Depot.
Reincorporation back to the United States
Proposals to reincorporate from shareholder-unfriendly tax havens into the United States have been refiled at Tyco and Ingersol Rand. Last year these proposals received 26.4 percent and 42.3 percent of votes cast, respectively.
Proxy Access
The SEC is currently deliberating a proposed shareholder access rule, which allows the submission of access proposals this season in anticipation of a final ruling. The AFSCME Plan, in co-sponsorship with New York State Common Retirement Fund, California Public Employees' Retirement System and the California State Teachers' Retirement System, has filed for proxy access at Marsh & McLennan Companies, the parent of Putnam Funds, as the first test of the proposed rule. The proposed SEC rule contains a provision that allows for inclusion of proposals filed for annual meetings to be held after January 1, 2004.
Business Strategy Reports
The Plan has refiled resolutions at Waste Management and Allied Waste urging that the companies report to shareholders the effect that any measures to oppose privatization has on company business strategy. These reports would disclose the additional risks faced by companies that engage in the controversial business practice of privatization. The proposals define privatization as the shift from provision of public services by governmental entities to provision by private companies, and ask that the reported measures to oppose privatization include initiatives such as "living wage" requirements.
Overall Corporate Governance
Proposals that rescind the poison pill have been re-submitted at Circuit City, which received a majority vote to redeem its pill last year, and at the Bank of New York.
