Corporate cut & paste: US style

As most people will be aware, the SEC is currently consulting on a rule that would require US corporations to disclose internal pay ratios. (This is something that the UK government thought was not worth pursuing remember.)

As you might expect, the US business lobby are no fans of this rule. And, just like I found in responses to UK consultations on exec pay and other issues, companies are sticking generic responses in to the SEC consultation. Hat-tip to Change to Win Investment Group, who spotted this last week. Compare this response to the SEC and this one.

I thought I'd see if I could find a source, so took a slice of text out of one of the responses and searched around for similar docs. It turns out that the National Investor Relations Institute produced a template letter, here.

US lobbyists seem less ashamed of this though, as the template is freely available on the NIRI site. In contrast, companies have sought to 'personalise' their responses.

Powering down

Blogging will be light to non-existent for a while now, but I shall keep things ticking over...

Oracle defeated, again

There we go, Oracle lost its 'say on pay' vote for the second year running. And remember that Larry Ellison holds a quarter of the company's stock, so it requires a serious level of investor opposition to tip into a majority defeat. Another win for US shareholder activists, and CTW in particular.

CtW Investment Group, an arm of labor federation Change to Win, had urged Oracle shareholders to vote against three members of Oracle’s compensation committee for awarding Chief Executive Larry Ellison excessive pay and the board’s failures to respond to longstanding compensation concerns. Ellison received compensation valued at $76.9 million in the fiscal year that ended in May. Oracle’s stock rose nearly 28% in those 12 months.
After the vote totals were announced, Michael Pryce-Jones, an official from CtW, asked the board whether Bruce Chizen, the head of Oracle’s compensation committee, should step down in light of the consecutive “say on pay” defeats.

Keep an eye on Oracle

I blogged previously about the forthcoming showdown at Oracle (AGM tomorrow). I think this could turn into a bloodbath.

There's an interesting joint statement from CalSTRS, PGGM and Railpen here. They are going for the whole board, as well as the exec pay policy.

 we consider it is in the best interests of our beneficiaries to withhold support from all nominees to the Board at the 2013 annual shareholder’ meeting. Consistent with this view, we further consider that it is in the best interests of our beneficiaries to support the shareholder proposal seeking the appointment of an independent Chairman to the Board and to vote against the advisory vote on pay.

I wouldn't bet against the company losing the 'say on pay' vote AND seeing some directors fail to get a majority vote in favour.

Employees in corporate governance

There's a good blog on employees in corporate governance by Janet at the TUC here. The TUC have published two docs on this subject, one looking at the case for employee representation at board level, and the other looking at existing practice across Europe (this isn't just about Germany).

Interested to hear what any passing corp govsters think about this argument -

Institutional investors such as pension funds and insurance companies hold highly diversified portfolios of hundreds if not thousands of shares; it is simply not possible for the staff of these organisations, however dedicated, to engage effectively with all the companies whose shares they own over all the issues for which shareholders are ultimately responsible. They also hold a much smaller proportion of the UK stock market than was the case just fifteen years ago: UK pension funds and insurance companies combined now own less than 11% of UK shares, down from over 40% in 1998. In contrast, over 50% of UK company shares are now held by overseas investors, whose ideas about how companies are run may be informed by their own national context rather than that of the UK.
An additional problem is the increasing reliance of investors on share trading to generate financial returns , rather than taking a long-term approach to share ownership. The interests of share traders lie in short-term fixes to raise company share prices, rather than long-term strategies to foster sustainable organic growth. There should be no role for short-term share traders in corporate governance.
The interests of workers, on the other hand, lie in the long-term success of their company. It is workers who bear the greatest risk in times of company failure, as they invest their labour, skills and commitment in the company they work for, and unlike shareholders cannot diversify this risk. Putting workers on company boards would help boards to prioritise investment in long-term company success, rather than being distracted by short-term financial engineering, as occurred in the financial sector in the run up to the crisis. Workers bring with them in-depth knowledge of their company and the environment in which it operates, making them well-placed to contribute to strategic and operational discussions that are central to board decision-making.
Indeed, research shows that countries with strong workers’ participation rights score more highly on a range of important measures, including R&D expenditure, employment rates and educational participation among young people, while also achieving lower rates of poverty and inequality.

The IIC shifts position on audit

I won't rehearse the issues around this one as have blogged previously about it. Just to say I think the IIC's update on its audit paper is a step forward. The position adopted by a previous IIC paper did not reflect all investor opinion - which is split on the issue of mandatory rotation -  though the updated version issued in Dec 2012 does acknowledge differing views.

The problem, as I've mentioned before, is that some in the auditing business rather naughtily used the Dec 2012 IIC paper to suggest that the body - and investors generally - were opposed to mandatory rotation. eg -

the UK’s Institutional Investor Committee – made up of representatives of from the Association of British Insurers, the Investment Management Association and the National Association of Pension Funds, which together manage or own £4 trillion of assets – set out in a paper in December 2012 clear opposition to mandatory rotation.

Therefore it is helpful that the IIC makes clear that it "has not reached a consensus on the merits of mandatory auditor rotation."

Full blurb below

Update on IIC Audit Position Paper

UK institutional investors continue to believe that ensuring a high quality of audits is vital in ensuring that markets value and trust the information reported. As set out in the December 2012 paper, investors support the objectives of the European Commission's proposals to safeguard auditor independence and objectivity and to improve the communications between auditors, audit committees and shareholders.
Investors are concerned that, where auditors hold office for long periods, this can affect their independence and objectivity, which are vital in ensuring audit quality. However, the IIC has not reached a consensus on the merits of mandatory auditor rotation.
The December 2012 IIC Position Paper remains reflective of UK institutional investor views on the remainder of the EU proposals.

From here

Beneficiary representation

I think this is a really good idea. Striking that ordinary punters - as savers - have no real voice. A body like this could develop into something really interesting.

Commission calls for a new not-for-profit organisation to represent savers

Posted on Tuesday 22nd October 2013

A hard-hitting report on the distribution of wealth in the UK will today call for a series of measures to encourage saving – even among those on the lowest incomes – and for a new not-for-profit body to represent the interests of savers.
The University of Birmingham Policy Commission report, entitled: Sharing our good fortune: understanding and responding to wealth inequality urges policy makers to do more to help people avoid problem debt.
The report, to be launched in Westminster tonight, states: “In terms of debt prevention, increased levels of saving would clearly help to avoid the need to borrow. Saving is clearly difficult for those on very low incomes but if people can afford to repay a loan, this suggests that they could afford to save.”
Among the recommendations are:

• Automatic enrolment into a savings account for people starting a new job
• A match-saving scheme devised to encourage and reward savings by those on low incomes
• Fresh incentives to increase the amount saved in occupational pensions for those on low and middle incomes
• Increased funding for debt advice and Credit Unions
• The creation of a new not-for-profit organisation to represent the interests of savers

The Rt Revd David Urquhart , chairman of Commission, said: “The debt problem in this country is spiraling out of control. Pay day lenders are preying on some of the most vulnerable in society. The less well off used to save hard for things they wanted but today’s society puts everything on credit and serious problems occur when those loans have to be repaid. We need to persuade more people to save, even if it’s very small amounts and policy makers need to grasp the nettle to reverse the escalating debt crisis.”
Professor Karen Rowlingson, lead academic on the Commission, said: “The gap between rich and poor in Britain today is much greater than people think it is, or want it to be. This Policy Commission calls for a fresh discussion about how to help people reduce debt and build some savings.”
Commission member Dr Paul Cox, added: “An organisation that serves savers’ interests has to be established if value for money is to be secured for the millions of working adults who are starting to save through pension auto-enrolment and their desire to provide for their future.
“Currently, investment products still do not have fixed prices and usually carry a product fee plus a multitude of add-ons that consumers neither agree or are even aware of.  An organisation serving savers that independently challenges these and other conventions can help the benefits of competition pass to consumers as they do in other industries.
“The organisation could be funded through a flat rate £1 charge collected on all UK investment trades over £10,000 or alternatively funds might come from charitable trusts and eventually, ideally, direct debits from savers who would become members.”