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Workers Capital News - August 30, 2010

In this issue:

  • Governance and Disclosure

    2010 US proxy season round-up shows record support for ESG / New sustainability indicators suggested for corporate sector / China’s national pension fund asked for support on sustainability disclosure / Responsible investors band together; examine ESG and financial reporting integration

  • Shareholder Activism

    CalPERS rallies shareholder support for La-Z-Boy proposal

  • Pensions and Investments

    UK’s default retirement age to be scrapped by October 2011 / UK AstraZeneca employees may strike over proposed DB pension changes / Italy raises retirement age by 3 years as part of austerity measures

  • Feature Section

    US Pension Funds highly active in shareholder lawsuits in 2010

Governance and Disclosure

2010 US proxy season round-up shows record support for ESG

                Responsible Investor (RI) reports that a summation of votes that investors cast during US corporate AGMs (annual general meetings) this year reveals a positive trend of support towards environmental, social, and governance (ESG) factors. Other corporate policies on workers’ rights, sustainability reporting, and increased disclosure of political spending also were backed by shareholders in unprecedented numbers.

New sustainability indicators suggested for corporate sector

A US team of responsible investment experts has proposed a new approach for managing sustainability, RI reports.  The proposal outlines a move away from previous sustainability KPI (key performance indicators) models based on compliance in disclosure, towards a model that champions a more active attitude on sustainability. Read the report here.

China’s national pension fund asked for support on sustainability disclosure

In response to a recent spate of marine pollution accidents in China, The Association for Sustainable & Responsible Investment in Asia suggests that the Chinese National Pension Fund (worth 777 billion Yuan) should demand more disclosure on from the extractive and construction companies in which it invests. Cited in Global Pensions, the Association also note that due to “insufficient investor demand for routine corporate environmental disclosure”, measures to reduce accidents are seldom taken until a pollution crisis has occurred.

Responsible investors band together; examine ESG and financial reporting integration

RI reports that institutions devoted to responsible investing, including UNPRI (Principles for Responsible Investment) and the International Corporate Governance Network, have created a new group – the International Integrated Reporting Committee (IIRC) – to study and create efficient and effective methods of integrating ESG into the financial reporting process of companies.. The IIRC aims to produce initial proposals for a more integrative reporting system by 2011.

Shareholder Activism

CalPERS rallies shareholder support for La-Z-Boy proposal

The California Public Employees’ Retirement System (CalPERS) is seeking support from fellow investors of La-Z-Boy on a shareholder resolution that will be presented at the corporation’s AGM on August 18. The resolution stipulates a request for the company to declassify the board of directors, as well as implement an annual election of all directors. This is not the first time that such a request for changes to La-Z-Boy’s system of corporate governance has been made– a similar proposal for board declassification in 2008 garnered 57% of the vote.

Pensions and Investments

UK’s default retirement age to be scrapped by October 2011

Global Penssions reports that the British government issued a proposal for a six-month timetable for April to October 2011 late last month to phase out the current default retirement age of 65. The argument for phasing out the default age maintains that such action would allow older people over 65 more flexibility in deciding when to stop working and accrue a better pension for retirement, as well as ease the burden off of employers’ administrative procedures for statutory retirement., the government maintains that employers may still individually decide a retirement age, as long as there is objective justification behind the decision.

UK AstraZeneca employees may strike over proposed DB pension changes

GMB and Unite are asking its AstraZeneca members to join them in support of strike action in opposition to the company’s plan for DB (defined benefit) pension scheme changes. The proposal, which states that the company will not consider any pay rises from July 1st onward as pensionable salary, were put forward by AstraZeneca management in light of its £1.4 billion deficit.. With operating profits up 24% and year on year growth of 11%, the unions maintain that the workers who “actually generate these profits” should not be short-changed.

Italy raises retirement age by 3 years as part of austerity measures

The Italian government has made the decision to raise the retirement age by 3 years, as part of sweeping measures being implemented across the pension system. The proposal for these changes was drafted following the European Commission’s determination that Italy’s current measures to increase pension ages of women in the public sector by 2018 were not effective enough to equalize pension age between the sexes. Implementation will start from 2015 onwards – this move is projected to save the government €86.9 billion by 2050.

Feature Section

2010 has, so far, proved to be an active year for shareholder lawsuits. Ongoing legal battles are being waged by pension funds seeking to recover financial losses traced back to the lack of appropriate corporate governance mechanisms and risk management .

Currently, the  public pension funds of New York and Ohio are making attempts to lay claim to lead plaintiff status in the lawsuit against BP for the company’s misconduct which ultimately led to the disastrous Gulf of Mexico spill.

These funds are not the only ones seeking to lead legal cases; earlier this month GP reported that the Maryland State Retirement and Pension System was appointed to serve as lead plaintiff in the consolidated shareholder case against the Toyota Motor corporation for its failure to disclosure defects related to sudden and unintended acceleration in its products. Investors of the automobile company are basing their claims to financial remediation in light of information that revealed that Toyota had knowledge of the defect in the acceleration system six years before the first recall of their vehicles. As a result of the company’s failure to address or disclose these problems, both the value of Toyota’s stocks as well as products have plummeted, causing significant economic losses to investors. The Maryland fund claimed lead plaintiff status due to its allegation that it had accrued the largest losses in investments.

Similarly, the California Public Employees’ Retirement System (CalPERS), along with Amalgamated Bank and the Manville Trust, filed a lawsuit in June this year against Massey Energy, alleging that the corporation had neglected its safety oversight duties and wilfully deceived its investors in light of the mining explosion in West Virginia this April that killed 29 workers. Following discussions and negotiations with CalPERS and other state public pension funds from North Carolina, New York, and Connecticut, GP reported that Massey Energy made the decision to improve its corporate governance practices. Among the changes announced were:

  • Creation of a safety committee consisting of independent directors,
  • Making the move towards increasing board accountability by introducing annual director elections,
  • Amending the corporate governance guidelines to better reflect responsibilities of lead directors,
  • Enacting a new prohibition against allowing a Massey director who is also a CEO of a public company to serve on the boards of more than two public companies, and
  • Allowing majority voting in non-contested director elections.

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