Group items tagged

themes

What should be the time-horizon of investor engagement? Do activist investors have too narrow a focus on short-term gains? How is engagement most effective? Is there a particular governance or ownership structure that promotes better engagement? How can mainstream large mutual funds and asset managers increase their level of engagement with companies? Are there specific incentives (or lack thereof) that prevent institutional investors from becoming more actively involved with their portfolio companies?

Mary Schapiro

Pershing Square

highlighted the positive impact of say-on-pay votes, and better disclosure of director qualifications.

SEC's commitment to address proxy voting mechanics and the rules around beneficial ownership disclosure.

first panel

Reuters Editor-at-Large Chrystia Freeland

agency's efforts to improve engagement between shareholders and their investee companies

Bill Ackman,

active ownership, and opposed the notion that activists have a short time horizon

engaging with management and the board, he argued.

Martin Lipton

Wachtell

Lipton, Rosen and Katz

acknowledged that some activist investors with long-term significant positions may benefit investee companies.

obsession for shareholder value in terms of quarterly results

diffused ownership of U.S. corporations

constitute "the greatest threat to the economies of the western world." 

Mats Anderson, CEO of the Fourth Swedish National Pension Fund

Runa Urheim

Scandinavian perspective

Norges Bank

Swedish system of boards fully comprised of independent directors and shareholder-led nomination committees

Norges Bank

ave a significant shareholder.

Nadia Calvino

Internal Markets and Services of the European Commission

view corporate governance as a key component of a well-functioning economy

new requirements should be made with great caution, since it may have substantial impact on numerous parties. 

second panel, Julian Franks

perspective of labor funds

"Unfulfilled Expectations? The Returns to International Shareholder Activism.”

paper

compared shareholder activism in Europe, North America, and Asia

abnormal returns when the activism results in specific measurable outcomes, such as changes on the board, payout policies, restructurings, and takeovers.

Brandon Rees

London Business School

AFL-CIO’s Office of Investment,

endorse active ownership but maintain a buy-and-hold investment perspective

easier access to companies' boards through proxy access and other means of engagement is in the best interests of all minority shareholders.

final panel

role of institutional investors and the barriers to engagement with corporations

law at the University of Pennsylvania

law professor at the University of Munich

Calvino's view that regulators should tread carefully in order to avoid any unintended consequences of regulatory action, and opposed the notion of mandatory engagement.

Horst Eidenmulle

Edward Rock

free rider problem among institutional investors, who are competing on cost, price, and performance relative to peers.

little incentive for any individual player to take on the costs of engagement with uncertain benefits as in comparison to its peers.

Luigi Zingales of the University of Chicago

institutions' lack of incentives to engage

the costs of engagement may be significant for individual institutions, there may be opportunities to overcome the collective action problem by permitting greater collaboration among investors and easier access to the board by minority holders,

voto di lista system

“They say it in private but would never say it in public – board directors are turning a blind eye [in the UK],” he says. “We have a culture where we don’t ask questions.”

“There is no respect given to governance in some countries with which we do business. And governments will do anything to ‘get the deal’.

deliberate misuse of governance:

huge amount of bribery and corruption”

Governance has become “what you shouldn’t do – and adds no value”,

has become so “defensive” it is now “an irrelevant function”,

could not identify the comparative advantage of the company on whose board they sat.

It is the mentoring side of the boardroom – support, stewardship and leadership – that can work well, but when it comes to this role, the UK is “negligent”.

the selection criteria for non-executives is unclear,

the role of the senior independent director can be “opaque” or “irrelevant”.

part of the problem in the UK is the system of appointments, and the “clubbiness” surrounding boards

96 per cent of searches in the US are there for the headhunter to look good and to make an appointment

“American managers are becoming far more vocal about their boards out of sheer frustration – and a sense that unless you speak up, nothing is going to change,”

Australian boardrooms

creating culture at management level and have also tried to restrict the number of positions non-executives can hold

he answer lies not in a greater focus on strategy, but on engagement.

We have treated alignment and engagement as separate, instead of together.”

And yet two members of MF Global's five-person audit and risk committee, former HSBC Bank USA CEO Martin Glynn and former ICAP Plc Chief Operating Officer David Gelber, sit on the audit committees of three other public companies.

Corzine's compensation also raises red flags among governance experts, who contend the way he was paid had the potential to influence the executive's willingness to take risk.A source close to J.C. Flowers told Reuters that all four members of the compensation committee agreed unanimously on all decisions regarding Corzine's compensation.

he owned relatively little company stock

"A cynic would say that he had the incentive to take a lot of risks," said Alan Johnson, a New York-based executive compensation consultant who works with Wall Street firms.

"It just feels like they gave him carte blanche," he said.

One board member's connections raise questions of conflict of interest from the start,

All of the eight board members had years of financial sector experience, including a former bank CEO and a former insurance company CFO.

critics say the brokerage and clearing firm's board tolerated at least one possible conflict of interest, bent its own rules and failed to rein in Corzine as he drove the company into dangerous bets.