Spring Training 09: Nine Players and Issues to Watch During the - - PDF document

▶
spring training 09 nine players and issues to watch
SMART_READER_LITE
LIVE PREVIEW

Spring Training 09: Nine Players and Issues to Watch During the - - PDF document

Sep 07, 2022 205 likes •346 views

Spring Training 09: Nine Players and Issues to Watch During the Upcoming Proxy Season Patrick McGurn Senior Counsel ISS Governance @2009 Foley & Lardner LLP 1 Attorney Advertising - Prior results do not guarantee a similar outcome.

slide-1
SLIDE 1

1

Spring Training ’09: Nine Players and Issues to Watch During the Upcoming Proxy Season

Patrick McGurn Senior Counsel ISS Governance

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-2
SLIDE 2

2

Sideways Season: Voting Support Plateaus in ’08 (average % votes cast)

10 20 30 40 50 60 70

Repeal class board Elimin SMV Majority vote Parachutes Special meeting Say on pay Cum vote Indep bd chair Link pay to perf

2007 2008

’08: 4 issues average majority support; five in ‘07 Support grew for RCB, MTV, CV and IC

Source: RiskMetrics/ISS Governance Services

The “Sideways” Season, Part 2

10 20 30 40 50 60 70 80 90 100

S a y

  • n

p a y R e p e a l c l a s s b d M a j

  • r

i t y v

  • t

e P a y f

  • r

p e r f S p e c i a l m e e t P

  • l

i t i c a l c

  • n

t r i b C u m u l v

  • t

e I n d e p c h a i r E l i m i n S M V S u s t a i n r e p t Tracked Withdrawn Omitted Voted

Lion’s share of MTV & PFP proposals withdrawn Breakout season for SOP Pay and board issues dominate proponents’ agendas

Source: RiskMetrics/ISS Governance Services

Higher rate of

  • mission in 2008

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-3
SLIDE 3

3

Top 9 for 2009

Pitcher - President Barack Obama

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-4
SLIDE 4

4

First Inning: Election/Bailout Fallout Expected

Governance issues on the campaign trail

– Populist campaigns pitted Main Street vs. Wall Street – Shareholders’ Bill of Rights—Son of SOX—in the 1st 100 days?

Troubled Asset Relief Program (TARP) “Blowback” Say on Pay, Proxy Access, Compensation Reforms

New momentum on E/S issues

– Global Warming, Universal Healthcare, Political Contributions, Human Rights

First Inning: Election/Bailout Fallout Expected (cont.) Changes at SEC and DOL

– Mary Schapiro (Nominee for SEC chair draws mixed reviews)

Swift action on NYSE broker vote rule change? Fewer “no action” letters on shareholder proposal?

  • Rep. Hilda Solis (AFL-CIO Lifetime

Voting Score: 97%)

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-5
SLIDE 5

5

Catcher - Your Name Here

Second Inning: Focus on Board Elections

Uncontested elections

– Majority threshold voting (MTV) takes hold

70% of S&P 500 boards boost accountability 2008: Average support >50% of votes cast

– Half of proposals withdrawn

2009: Proposals float downstream; cleanup at S&P

– ’09: High “No” votes expected

Pay and risk management issues will predominate

Contested elections

– What’s next? Ballot access? Fight cost reimbursement? – Hedgies subject to market pressure

A drop in proxy fights?

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-6
SLIDE 6

6

1B - Ira Millstein

Third Inning: More Calls For Independent Chairs

Focus on leadership in wake of breakdowns

– ’08: Average support of nearly 30% of votes cast

Majority support at WaMu (board pulls title/fired CEO) Issue at financials—Wachovia (board switched/fired CEO)

– ’09: Bumper crop of shareholder proposals expected

Will meltdown spur voting support? Global practices may influence support

Growing support in some boardrooms

– Minority practice in US

16% of S&P 500 firms; 22% of S&P 1500

– Focus on Lead Director Duties (Proposals)

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-7
SLIDE 7

7

2B - Congressman Barney Frank

Fourth Inning: Say On Pay: Stagnate to Legislate

When will the mandate become effective? ‘09: May remain top shareholder proposal topic

– ’08: Support remained steady at around 42% of votes cast

Majority votes at >10 firms including Apple and Sun Micro

– Management votes promised by >10 firms

Aflac (RMG’s 1st thumbs up in ’08) Jackson Hewitt Tax Service (RMG’s 1st thumbs down in US)

Continuing difference of opinion

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-8
SLIDE 8

8

3B - AMD Comp Panel Chair Bruce Claflin Fifth Inning: Pay During a Downturn/Populist Revolt

How far will the twin R&R plagues spread?

– Repricings hot topic in tech land

Shareholder approval? Most non-tech boards say “no”

– Resetting the bar: many looking to make changes

Most changes to metrics & hurdles in future years The “retention” bonus lives

The good news: most will stay the course

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-9
SLIDE 9

9

SS - Towers Perrin’s John England

Sixth Inning: Cleanup on the Compensation Aisle

What’s Out Pay for failure (P) Gross ups (P/L) SERPs/Def Comp (P/L) Conflicted consultants (P/L) Golden coffins (NEW-P) Perks, including PUCA Accelerated vesting (P) Employment agreements (P) What’s In Extending the TARP (P?/L)

– Pay risk analysis (P?/L) – Sharper claws (P?/L) – Closing tax loopholes

  • Severance (L)
  • Deduction caps (L)

Hold Thru Retirement (NEW-P) Internal pay equity (P) Meet the “malus”

– AKA two-way pay

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-10
SLIDE 10

10

LF - Carl Icahn

Seventh Inning: M&A Fears Ignite TO Issues

Restore right to call meetings

– ’08: Drop in support; ’09: Rise in proposals

Repeal classified boards (50%/50% split at S&P 1500)

– ’08: Rise in support; ’09: Drop in proposals?

Remember Bismarck: North Dakota or Bust (NEW!) Eliminate supermajority vote requirements Vote on poison pills

– Just Vote “No” hits boards that go forward without a vote

Advance notice requirements

– Housekeeping changes or disclosure of synthetic voting rights

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-11
SLIDE 11

11

CF - Walden Asset Management’s Tim Smith

Eighth Inning: E&S Issues Draft Off Obama Victory

Global Warming & Sustainability (60+) Political Contributions (50+) Universal Healthcare (40+) Other hot topics

– Human rights – International labor practices/EEO – Predatory lending – Internet privacy/freedom of expression

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-12
SLIDE 12

12

RF - Home Depot Lead Director Bonnie Hill Ninth Inning: Director/Shareholder Communications

New Rules of Engagement

– Talk first

Hot topics

– Risk, accountability and pay

– More directors seek meetings with investors

Formal meetings Social Networking

– RMG’s Governance Exchange

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500

slide-13
SLIDE 13

13

Additional Resources

2009 Policy Changes:

http://www.riskmetrics.com/policy/2009/policy_information

Policy Gateway:

http://www.riskmetrics.com/policy

Governance Exchange:

http://www.riskmetrics.com/governance_exchange/issuers

2009 Proxy Season Trends:

http://www.riskmetrics.com/knowledge/proxy_season_2009 Contact information

Patrick.McGurn@riskmetrics.com

@2009 Foley & Lardner LLP Attorney Advertising - Prior results do not guarantee a similar outcome. 321 N. Clark Street, Suite 2800, Chicago, Illinois 60654 - 312.832.4500