Real Progress Toward Corporate Reforms
The campaign by the AFSCME Employees Pension Plan to reform Corporate America is making progress. Among the latest signs: McDermott International, a leading worldwide energy-services provider, has agreed to work with the AFSCME Plan, and the nation's largest public-pension fund, to decide whether to return its corporate "headquarters" to the United States from its offshore tax haven in Panama.
The Plan, which represents approximately 2,800 of the union's employees and retirees, has been trying to persuade a number of "offshore" public corporations to re-incorporate "back home." If they do so, they'll be subject to domestic laws that protect investors — and be required to pay U.S. taxes on overseas income. One firm, Tyco International, annually saves an estimated $179 million to $268 million — up to six percent — by using its Bermuda tax haven.
Through negotiations with the AFSCME Plan and the California Public Employees' Retirement System (CalPERS), McDermott has "agreed to present and recommend a vote in favor of changing the company's domicile," said McDermott CEO and chairman of the board, Bruce W. Wilkinson.
McDermott will study re-incorporation issues as the first step in the process. Wilkinson called re-incorporation "contingent upon a variety of factors." The company has promised that the AFSCME Plan will have access to their study and ample time to respond to it. Pending the settlement of those issues, the company may place a management resolution on its proxy ballot next year to address reincorporation.
If the resolution does not gain the support of the board of directors, the ballot will contain a 500-word response by the AFSCME Plan and CalPERS. AFSCME President McEntee, who chairs the Pension Plan, and CalPERS Pres. Sean Harrigan, expressed satisfaction that McDermott now recognizes the importance of this issue to its shareholders. "Their commitment to undertake this full and complete review and their willingness to put this issue on the ballot is the first step in what we believe will be a responsible process that will lead them to come home to America," McEntee said.
The plan also made a significant advance with a widely publicized victory on the corporate-responsibility front. In March, the plan won 26 percent of the shareholder vote for its resolution urging manufacturing and service conglomerate Tyco International to come back to the United States from its Bermuda tax haven.
In April, the AFSCME Pension Plan chalked up yet another success, this time involving Tenet Healthcare Corp., a for-profit hospital chain being investigated by federal authorities who are looking into allegations of unnecessary surgeries and violations of doctor recruiting laws. Following a campaign by the Plan (which owns Tenet stock), CEO Jeffrey Barbakow agreed to drop his other title of chairman and resign from the board.
Another resolution put forth by the Plan, this one involving the software firm Adobe Systems Inc., would have prevented executives from cashing out for big financial gain before the effects of their mismanagement become apparent. The mechanism: requiring them to hold — for the tenure of an executive's term with the company — at least 75 percent of the shares they get from exercising stock options. Although the resolution was defeated in April, Adobe did agree — acknowledging shareholder criticisms — to impose that condition on CEOs, for 25 percent.
