Saturday, December 15, 2012

Shareholder Diversity Proposals in 2012

We undertook a survey of multiple sources of information reviewing shareholder proposals advocating increased director diversity on corporate boards.  This updates our review from 2011.
(See: http://championboards.blogspot.com/2011/07/shareholder-diversity-proposals-in-2011.html)

Lucian Arye Bebchuk, professor of law, economics and finance at Harvard Law School,  director of the Shareholder Rights Project (SRP), and director of the Harvard Law School Program on Corporate Governance, is responsible for one of the more successful shareholder proposal initiatives this year. 

Professor Bebchuk built a powerful collaboration among public pension funds to file shareholder proposals calling for annual director elections, overturning classified or tiered boards at under-performing corporations. Seven major pension funds and a foundation targeted 74 S&P 500 and other U.S. large-cap companies prompting them to move to annual elections of all their corporate directors.

According to Ellen Mullen writing in October 2012 for NACD Directorship, "Forty-eight boards agreed to bring declassification proposals to management, ... which account for almost 40 percent of the 124 S&P 500 companies with staggered board structures at the start of 2012. [Of that total], 33 proposals have already gone to a vote, with 27 passing resolutions to institute annual director elections. At least 15 more companies are expected to bring declassification proposals to management in the near future. Thirty-eight companies submitted and passed precatory proposals from SRP-represented investors."

A second SRP initiative begun late in the year was a petition urging the S.E.C. to adopt rules requiring public companies to disclose information about their political spending. While this initiative is far more controversial, what is noteworthy is the scale of Bebchuk's impact. His initiative generated over 300,000 comment letters to the S.E.C. And caught the attention of committee heads in both the House and Senate.

Bebchuk's impact contrasts sharply with that of diversity shareholder proposal submissions by other entities.

1.         In 2012, California State Teachers’ Retirement System (CalSTRS) public pension fund stated that “We are engaging nine companies this year on Board diversity. We have already filed or co-filed proposals at 5 of the companies and will likely file at the others as their shareholder proposal due dates come up.   We generally do not release the names of companies we are engaging with unless the proposal is going to be included in the proxy.”

In 2011, CalSTRS stated that they “withdrew all eight of its board diversity shareholder proposals filed during the 2011 proxy season after successfully engaging companies to consider diversity in director searches.

Urban Outfitters and American Financial Group were two of the companies receiving CalSTRS proposals in 2011, but both received another CalSTRS board diversity shareholder proposal in 2012, suggesting the “success” of the earlier proposal was short-lived. Neither Urban Outfitters nor American Financial Group have any women directors.

The CalSTRS strategy appears to be to encourage companies to “amend their EEO policies to prohibit discrimination based on sexual orientation and gender identity” – substantially different from boardroom diversity.

2.         Calvert Investment Management also is a lead proponent of diversity through shareholder proposals.  Calvert stated that “Calvert filed six shareholder resolutions for the 2012 proxy season including four lead filings with Urban Outfitters, American Financial Group, Pioneer Natural Resources, and Under Armour, plus two co-filings with Discovery Communications and True Religion Apparel. Proposals with five of the six were successfully withdrawn after each company added specific considerations of diversity in race and gender to their desired director characteristics. “

Under Armour added one woman director, Brenda Piper, in July 2012. Pioneer Natural Resources has no women directors and only one woman on the executive team. True Religion Apparel has no women directors. Discovery Communications has no women directors, one woman on the corporate management team (Human Resources), four women among six business and brand management team members, and two women among seven of the international management team members.

3.         Alliance Advisors LLC provided details regarding the 2012 proxy season shareholder proposals, although the word “diversity” did not merit attention among the shareholder proposals reviewed in their summary document.  Urban Outfitters’ shareholder proposal went to voting (and won 38% support) as did First Solar (with 18% support).  First Solar has no women directors.  

Alliance Advisors also mentioned the shareholder proposals submitted, then withdrawn, by Calvert and religious orders. In addition to those already mentioned were:
Adams Resources & Energy (no women directors), Key Energy Services (two women directors), and Renal Care Group (which was bought by Fresenius Medical Care in 2006, with neither firm having any women directors).

Alliance Advisors LLC - Shirley Westcott

Other sources summarized shareholder proposals, but reported no activity in the field of director diversity.

1.       The law firm of Davis Polk

“Finally, as we approach the shareholder proposal season, the 2012 Proxy Monitor report examined the shareholder proposal activities at Fortune 200 companies from 2012 meetings and found that a small group of shareholders continue to sponsor the majority of shareholder proposals (36% from labor and pension funds; 31% from three individual investors and their relatives and affiliates; and 22% from activists with socially responsible agendas), with a plurality of the proposals focused on corporate political contributions and lobbying. We will likely see a similar trend for 2013 meetings.” 
William Kelly, Davis Polk – william.kelly@davispolk.com

2.         Another law firm, Sullivan & Cromwell, LLP, similarly reported no appearance of director diversity shareholder proposals.

“2012 Proxy Season Review: Shareholder Proposals on Governance Structure Continue to Garner Strong Support and to Drive Structural Changes in 2012; Renewed Focus on Independent Chair; Proposals on Political, Social and Compensation Issues Remain Common, but Rarely Pass.” http://www.martindale.com/members/Article_Atachment.aspx?od=117954&id=1549958&filename=asr-1549960.2012.pdf
Sullivan & Cromwell LLP (July 9, 2012) - Patrick S. Brown, Los Angeles, brownp@sullcrom.com

3.         The Pennsylvania Bar Institute presented a summary of the information from the ISS shareholder proposal database for the Public Law Institute’s Securities Practice Center (prepared by D.F. King. & Co., Inc.). Director diversity proposals were not included among the top 10 shareholder proposals for 2012.

Securities Law Practice Center, Practicing Law Institute – Kara O’Brien

4.         James Copland, writing for The Manhattan Institute’s Center for Legal Policy, reporting on the ProxyMonitor.org database also found that no director diversity proposals were considered among the leading categories of submissions for 2012.

The Manhattan Institute’s Center for Legal Policy - James Copland c/o communications@manhattan-institute.org

5.         Ernst & Young summarized four key trends among the 2012 shareholder submissions, none of which involved diverse director selection.
Allie Monaco Rutherford - Corporate Governance Group - allie.rutherford@ey.com

In 2012, Institutional Shareholder Services (ISS) stated as follows, in their guideline recommendations for proxy voting:

“1a-4. Director Diversity/Competence - Board Diversity.
[ISS will recommend a ] Vote AGAINST or WITHHOLD from individual directors who:
Serve as members of the nominating committee and have failed to establish gender and/or racial diversity on the board. If the company does not have a formal nominating committee, vote AGAINST/WITHHOLD votes from the entire board of directors.”

Yet, ISS reported no recommendations against or withhold vote for any company during their 2012 season.

cheryl.gustitus@issgovernance.com

ISS Governance Resource Center

Women CEO Turnover – November 2012

Challenger, Gray & Christmas, Inc. reports on CEO turnover by month and year totals.  In December 2012, they reported that women CEO replacements by industry sectors increased by almost 6 percent from November 2011 to November 2012.  Women CEO replacements also occurred in more industry sectors in 2012 than in 2011.

Industry category
Nov. 2011
Nov. 2012



Government/Non-Profit
35
39
Health Care/Products
21
28
Financial
10
13
Media
7
3
Computer
6
7
Entertainment/Leisure
6
3
Pharmaceutical
5
3
Retail
5
4
Services
5
7
Consumer Products
4
4
Aerospace/Defense
2
1
Apparel
2
-
Automotive
2
-
Energy
2
-
Insurance
2
-
Real Estate
2
1
Utility
2
1
Construction
-
3
Electronics
-
2
Transportation
-
2
Education
-
1
Food
-
1
Industrial Goods
-
1
Telecommunication
-
1



Total women replacements
118
125
No. of industry categories
17
20

Year to date 2012 total CEO replacements were greatest for the health care/products sector at 212 changes (19.2% of YTD total) compared to 175 (16.0%) for the year to date 2011. Year to date 2012 total CEO replacements for the government/nonprofit sector was 162 changes (14.6% of the YTD total) compared to 139 (12.7%) for the year 2011.  Women CEO changes were more concentrated in these two sectors. Women CEOS turnover in the government/non-profit field was 31.2% of the total women CEO changes for the month, while women CEO turnover in the health care/products field was 22.4% of the total women CEO changes for the month.

Overall CEO turnover has been on the decline since 2008 when it reached a peak of 1,478 changes.  Through November, 2012 a total of 1,111 CEO changes were recorded, just 1.5% more than the first eleven months of 2011.


2005
2006
2007
2008
2009
2010
2011
2012
January
92
139
114
134
113
89
96
123
February
103
112
127
114
82
132
92
104
March
129
87
103
123
114
119
99
94
April
117
115
126
112
78
101
103
90
May
120
148
144
115
115
125
103
99
June
120
127
105
126
105
107
113
99
July
96
118
88
124
126
88
104
83
August
116
114
124
144
101
95
104
104
September
121
152
112
140
105
111
108
95
October
96
122
96
125
89
81
91
108
November
118
113
132
104
94
79
82
112
December
94
131
85
123
105
107
83










TOTAL
1,322
1,478
1,356
1,484
1,227
1,234
1,178
1,111

Source: Challenger, Gray & Christmas, Inc - http://www.challengergray.com/press/PressRelease.aspx?PressUid=249

Friday, December 7, 2012

Strong Women on TV – Then and Now

We were trying to remember some of the earliest TV shows “starring” women in leadership roles.  Parade Magazine had mentioned that Cagney & Lacey (1981-1988) was “a first” in women in police roles.  I certainly enjoyed Tyne Daly and Sharon Gless (who continues to star today on Burn Notice), but I had the feeling that there were many more role models before these two hit the TV screen.  So, naturally, I went through my memories and found the following:

The Goldbergs (written by and starring Gertrude Berg as Molly Goldberg) began as a radio show, then went on television from 1949 to 1956.
I Remember Mama (starred Peggy Wood as Mama Hansen and Rosemary Rice as her daughter Katrin) ran from 1949 to 1957.
I Love Lucy ran from 1951 to 1957 (starring Lucille Ball as Lucy Arnaz).
Our Miss Brooks (starring Eve Arden as Connie Brooks, the Madison High School English teacher) ran from 1952 to 1956.
My Little Margie ran from 1952 to 1955, starring Gale Storm as Margie Albright.
Annie Oakley (staring Gail Davis) was a true “first” law enforcement woman with a television show from 1954 to 1957.
The Ann Sothern Show (starring Ann Sothern as Katy O'Connor, assistant manager of the Bartley House Hotel in New York City) ran from 1958 to 1961.
I Dream of Jeannie (starring Barbara Eden as a Genie freed from the bottle by a US astronaut) ran from 1965 to 1970.
That Girl (starring Marlo Thomas as a struggling NY actress Ann Marie) ran from 1966 to 1971.
Mary Tyler Moore starred as Mary Richards, associate producer at a Minneapolis TV newsroom, ran from 1970 to 1977.
Maude (starring Bea Arthur) ran from 1972 to 1978.
Rhoda was a spin-off of Mary Tyler Moore, starring Valerie Harper as Rhoda Morganstern, from 1974 to 1978.
Police Woman (starring Angie Dickinson) ran from 1974 to 1978.
Wonder Woman – 1975 to 1979, Lynda Carter
Laverne & Shirley (1976 to 1983) about two single women in the 1950’s and 1960’s, starred Penny Marshall as Laverne DeFazio and Cindy Williams as Shirley Feeney.
The Bionic Woman starred Lindsay Wagner from 1976 to 1978 as a spin-off of The Six Million Dollar Man.
Charlie’s Angels (starring Kate Jackson, Farrah Fawcett-Majors, and Jaclyn Smith) ran from 1976 to 1981.
The movie Private Banjamin, starring Goldie Hahn, came out in 1980.

After all these, finally, Cagney & Lacey, starring Sharon Gless as Det. Sgt. Christine Cagney and Tyne Daly as Det. Mary Beth Lacey ran from 1981 to 1988.

Hill Street Blues, with Betty Thomas as Sgt. Lucy Bates and Veronica Hamel as Public Defender Joyce Davenport, ran from 1981 to 1987.
Murder She Wrote – 1984 to 1996, Angela Lansbury as mystery writer and amateur detective Jessica Fletcher
Moonlighting, co-starring Cybil Shepherd with Bruce Willis as co-owners of a private detective agency, ran from 1985 to 1989.
Golden Girls, starring Betty White, Rue McClanahan, Estelle Getty, and Bea Arthur ran from 1985 to 1992
Murphy Brown, starring Candice Bergen, ran from 1988 to 1998.

The movie Thelma & Louise, starring Geena Davis as Thelma and Susan Sarandon as Louise, came out in 1991 (some may dispute whether or not this was a strong female role).
Sisters – 1991 to 1996, five sisters
The film, A League of Their Own, starring Geena Davis and Madonna, came out in 1992.

Dr. Quinn, Medicine Woman, starring Jane Seymour, ran from 1993 to 1998.
The X-Files, co-starring Gillian Anderson as Dana Scully, ran from 1993 to 2002.
Touched by an Angel – 1994 to 2003, Della Reese and Roma Downey
Xena: Warrior Princess – 1995 to 2001, Lucy Lawless as Xena
JAG showcased Catherine Bell co-starring as Lt. Col. Sarah ‘Mac’ MacKenzie when it ran from 1995 to 2005.
Providence – 1999 to 2002, Melina Kanakaredes as Dr. Sydney Hansen,
Judging Amy – 1999 to 2005, Amy Brenneman as Amy Gray.
West Wing had a number of top women stars when it ran from 1999 to 2006 including Stockard Channing, Allison Janey, Janel Molony, and Emily Procter.
Gilmore Girls – 2000 to 2007, Lauren Graham and Alexis Biedel.
Boston Legal showcased Candice Bergen from 2004 to 2008.

Today, we have a host of women playing leadership roles in Law & Order and CSI series with several spinoffs, NCIS and NCIS Los Angeles, Castle, Bones, Covert Affairs, Leverage, Criminal Minds – ignoring entirely the bottom feeders of Hot in ….  or Housewives of…  and their ilk.

Researchers have found strong evidence that women respond positively to strong female characters. And, surprisingly, men respond even more positively to shows with strong female roles. 

Wednesday, December 5, 2012

What Constitutes Financial Security?

There’s an old New England proverb that says, “God gives food to every bird, but does not throw it into the nest.”

New Englanders, being fiscal conservatives, would advise us that financial security – “having ENOUGH wealth” -- means ensuring that you have, or know how to find and preserve, the essentials you need now as well as during the harsh winters ahead.

It’s not really how much conspicuous consumption you can “afford” or whether you are keeping up with the Jones, the Smiths, or the Kardasians.  It’s a question of what do you really need.

There’s a story, too, from the recent floods, about a woman who wanted to stay in her own home, in spite of numerous warnings to evacuate. The Fire Department came with a bus and tried to persuade her to leave with them.  She said, “God will protect me.”  When the waters rose to the level of her windows, she rebuffed the Coast Guard’s offer of a boat to rescue her.  She said, “I’ll put my faith in the Lord.”  Even as she was on her rooftop, with a National Guard Reserve helicopter circling above with rescue basket and cables dangling, she declined their offer of safety, saying, “God is my savior.”  Predictably, she drowned.

At the Pearly Gates, she met Her Maker with these words, “Lord, why didn’t you save me?”

The reply was, “I sent you Firemen, the Coast Guard, and the National Guard.  The choice was yours’.”

The Federal Reserve Bank warns that women and the elderly constitute the most “at risk populations, financially” due to their lack of knowledge about their debt levels, failure to have long-term financial plans, and their vulnerability to financial scams. 

If women think their student debt is unwieldy, wait until women see the cost of long-term health care not covered by Medicare or Social Security.  Since women live significantly longer than men, have lower average earnings, their lower propensities to save money, and tendencies to plan less (financially) for their future, women will incur a significant burden in their older years trying to fend for themselves.

Smart women are the ones pursuing financial knowledge through advisors, groups like the Financial Planning Association, and local Women’s Economic Development Corporations.  Other savvy women are going back to school at university extension programs taking classes in basic financial management and personal financial planning.

But, women can do more.  There are problems that we can address as entrepreneurs, innovators, and business planners.  We can design alternative strategies for managing our elderly years.  Some women have designed in-hospital robots to help care for the disabled.  Other women have designed local medical testing facilities.  Other women and men are designing mutual support villages for seniors – many of whom will no longer be able to drive and need more proximate support networks.

We need more creative thinking to address the imminent arrival of 70-75 million baby boomers --  over half of whom will be women on their own -- with new forms of housing, services, medical delivery and information strategies.  Friends and family may be few and far between for women in their senior years. And as for the intervention of a Divine Being, this pretty much says it all:

“We turn to God for help when our foundations are shaking only to learn that it is God who is shaking them.”  -- Anonymous