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Workers’ Capital News - Sept. 7

In this issue:

  • Governance and Disclosure

    Ethos Study on Executive Remuneration Reveals Positive Impact of ‘Say on Pay’/ Australian Council of Superannuation Investors Calls for Improved Disclosure on Executive Remuneration/ CalSTRS Pushing for Majority-Voting Standard and More Diversity on Corporate Boards/ SEC Adopts Rules on Disclosure of Conflict Mineral Use and Payments to Governments

Governance and Disclosure

Ethos Study on Executive Remuneration Reveals Positive Impact of ‘Say on Pay’

As reported by Ethos News and IPE, a recently published study by Ethos (currently available in German and French) reveals that the push for ‘say on pay’ has had a positive impact on the transparency and structure of companies’ board and executive remuneration.  Examining the board and executive remuneration of 100 of the largest publicly listed Swiss companies in 2011, the study exhibits that aggregate board and executive pay in financial sector companies decreased by 23%, despite an increase of 5% in other sectors. In general, remuneration in 2011 fell by 6% from 2010. The report also shows that though companies have been slow to implement ‘say on pay’ votes, as only 49 submitted remuneration reports to shareholders’ advisory vote in 2012, the level of contestation to remuneration reports has been increasing every year. Ethos’ study also notes that remuneration reports are increasingly transparent and that companies have demonstrated more openness towards dialogue. However, a majority of the companies still do not adhere to self regulation. Thus, to advance shareholder rights through regulation, Ethos is supporting a counter-project of the Swiss Parliament which was formed in response to the popular “against executive remuneration” initiative. The counter-project would require companies’ remuneration reports to be submitted to a shareholder vote, and would also clear the path for shareholder resolutions aimed at amending remuneration systems.

Australian Council of Superannuation Investors Calls for Improved Disclosure on Executive Remuneration

Responsible Investor reports that the Australian Council of Superannuation Investors (ACSI) has issued a call for listed companies to improve their policies on disclosure of executive remuneration, particularly with regard to the criteria for CEO bonuses. (Click here to read ACSI’s expectations for the 2012 AGM season). Ann Byrne, ACSI Chief Executive, has stated that superannuation fund shareholders are expecting to see improvements at companies’ AGMs. The call for better disclosure comes after some executives, such as Alan Joyce of Qantas and Marius Kloppers of BHP Billiton, have voluntarily decided to forgo their bonuses for 2012. However, ACSI has maintained that the main issue to address is why underperforming companies provide CEO bonuses to begin with, whether CEOs choose to waive them or not. The ACSI has welcomed recent improvements in corporate disclosure, such as the introduction of the ‘two strikes rule’ that allows a board to be thrown out if more than 25% of shareholders reject the company’s executive pay policies two years in a row. However, the ACSI has also highlighted the continuing problem of many companies still failing to provide adequate disclosure on the criteria for determining executive bonuses.

CalSTRS Pushing for Majority-Voting Standard and More Diversity on Corporate Boards

As reported by Top 1000 Funds, CalSTRS’s corporate governance team is focusing on pushing for a majority-voting standard and more diversity on corporate boards. CalSTRS has also shifted its attention towards engaging small cap companies in the Russell 2000 stock market index, the majority of which maintain a plurality vote standard. According to the plurality vote standard, a nominee to the board can be elected with only one affirmative vote. CalSTRS is aiming to encourage these companies to adopt a majority-voting standard, whereby a sitting board member requires a majority of votes cast to be affirmative in order to continue serving on the board. As maintained by CalSTRS, the majority-voting standard is more conducive to an alignment of interests between board directors and shareholders. CalSTRS’s program to push for majority-voting has proven successful thus far, with over a third of the companies contacted during the 2012 proxy season adopting majority voting without filing a proposal. With reference to promoting increased diversity on corporate boards, CalSTRS has partnered with CalPERS to launch a Diverse Director DataSource  a clearinghouse of pre-approved board candidates that highlights those with diverse skills and fresh perspectives.

SEC Adopts Rules on Disclosure of Conflict Mineral Use and Payments to Governments

As reported by Social Funds News, the SEC has adopted rules, that are part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, on the Disclosure of Payments by Issuers Engaged in Resource Extraction and on the Disclosure of the Use of Conflict Minerals. The first rule mandates the disclosure of payments made to governments by companies in the oil, gas and mining sectors involved in resource extraction and operating in resource-rich nations. According to the rule, an SEC form called Form SD, has to be used by companies to disclose payments of $100,000 or more, made to governments during a single fiscal year. The second rule regarding disclosure on the use of conflict minerals maintains that US companies must disclose whether conflict minerals (such as tantalum, gold and tungsten used to fund conflict in the Democratic Republic of the Congo) are contained in their products. Groups such as Boston Common Asset Management have praised the new regulation as an important step towards increased corporate transparency. However, some investor groups have also stated that giving companies 2 to 4 years to disclose the use of conflict minerals is too long.

Disclaimer: The CWC News Digest is a compilation of news items covered in industry publications. The content does not necessarily reflect the views of the Committee on Workers Capital or its members. Comments and reflections on news items may be sent to gpatel@share.ca .

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