Apparently, shareholders are staging something of a palace coup at annual meetings this year.
According to research conducted by the Investor Responsibility Research Center (IRRC), over 40 percent of the governance-related proposals submitted by shareholders at annual meetings this year were passed. All told, 83 out of 200 governance-related — and owner-submitted — proposals have been ratified, according to the study, which was published by Dow Jones Newswires?
During the annual meeting season last year, just 66 of 272 proposals received a majority vote.
This year, 22 of the resolutions that received majority support drew at least 70 percent of the total vote. That’s double last year’s results — and a higher percentage than in any voting season in recent memory, according to the wire service, citing an IRRC official.
Of course, shareholder resolutions are not binding. In fact, management teams typically ignore the results. Still, the resolutions go on record and tend to galvanize shareholders dissent.
Interestingly, resolutions calling for director independence failed to attract the support a majority of shareholders.
Bear in mind, most of the shareholder resolutions were submitted last fall before the stunning collapse of Enron Corp., let alone the subsequent rash of accounting scandals and bankruptcy filings. The voting, however, took place after the Enron scandal — and a few others — came to light. Rosemary Lally, the bulletin’s editor, told Dow Jones: “While the topics were not affected, the support was.”
Which resolutions generated substantial support? Those that challenged senior managers’ ability to easily fend off takeover offers.
That’s not overly surprising. Some shareholder rights activists argue that stringent anti-takeover provisions and poison pills are primarily designed to help top managers keep their positions of power — and their jobs.
During this year’s annual meetings, scores of investor groups submitted resolutions calling for corporate boards to redeem or hold a shareholder vote on anti-takeover devices. Many also introduced resolutions recommending the elimination of supermajority voting on takeover-related decisions. In addition, a number of shareholder proposals called on companies with staggered board terms to hold annual director elections.
Dozens of companies received at least one of the three proposals, according to Dow Jones. And they drew an average of between 59 percent and 61 percent of the total votes cast.
The supermajority and staggered board proposals hit record highs, according to the IRRC’s research, which dates back to the mid-1980s.
On the other hand, proposals calling for independent directors or committees failed to drum up widespread support, generating an average vote of 30 percent. Still, that’s more backing than similar proposals have generated in recent years. Last year, for example, proposals calling for greater board independence received the support of about 22 percent of voting shareholders.
Both the New York Stock Exchange and Nasdaq have called for boards of publicly traded companies to be filled with a majority of independent directors and for critical committees to be independent. And the recently signed Sarbanes-Oxley bill requires board audit committee independence.
Dazed and Confused
Shakeups at many companies — along with shifts in business strategies — have left many employees uncertain about how their jobs tie in to corporate objectives. This, according to a new study of nearly 13,000 workers conducted by Watson Wyatt. The consulting firm asserts that all this confusion could make it more difficult for companies to recover from protracted slumps in business.
Less than half of employees (49 percent) understand the steps their companies are taking to reach new business goals — a 20 percent drop since 2000, according to the study.
The survey also found that most employees do not make the connection between job performance and pay. Only about a third of the respondents said they see a clear link between the quality of their job performance and the money they earn.
“Confusion about corporate goals and uncertainty about the link between pay and performance will complicate economic recovery for many companies,” says Ilene Gochman, Watson Wyatt’s national practice leader for organizational effectiveness and the author of the WorkUSA 2002 survey.
Adds Gochman “This is extremely unfortunate… There is tremendous positive impact to the bottom line when employees see strong connections between company goals and their jobs. Many employees aren’t seeing that connection.”
According to the study, three-year total returns to shareholders (TRS) are three times higher at companies where employees understand corporate objectives and the ways in which their jobs contribute to achieving them.
“Companies cannot develop effective teams and working relationships unless everyone involved clearly understands the connections between their jobs and objectives,” Gochman notes. “Workers and their companies excel when they know why their jobs matter and they understand what’s in it for them.”
Other key findings of the study:
- Only 45 percent of workers have confidence in the job being done by senior management, down from 50 percent in 2000.
- 63 percent believe their company conducts business with honesty and integrity.
- But only 39 percent trust senior leaders at their company.
- 43 percent say their company effectively manages business changes such as downsizing, mergers, restructuring and expansion.
- Less than third believe their company communicates effectively with employees.
- About one in five say their company involves employees in decisions that affect them.
- 32 percent say senior management motivates them to perform well.
- 40 percent see no clear link between their jobs and pay.
- 40 percent believe that high performing workers go unrewarded.
- 43 percent say their companies do a good job telling them how their pay is determined.
- 60 percent are satisfied with their pay.
- 49 percent are satisfied with their benefits.
WorldCom’s Ex-Employees Place a Collect Call
Worldcom’s laid-off workers are reportedly demanding that the bankrupt telco pay them tens of millions of dollars in severance and health benefits that were promised but not paid.
According to published reports, more than 40 ex-WorldCom workers have asked the U.S. Bankruptcy Court in Manhattan to require that severance payments be made to at least 4,000 employees — and possibly thousands more.
The employee group is receiving backing from the AFL-CIO, which is reportedly paying the legal bills for the ex-WorldCom employees.
“These WorldCom workers believed in their company and worked hard for their company — and in return they were robbed of their 401(k)s, their jobs and health care,” said John Sweeney, the AFL-CIO’s president, in letters reportedly sent to the heads of AOL Time Warner Inc. and Metropolitan Life Insurance Co., two of WorldCom’s biggest creditors. Sweeney reportedly asked the two companies not to block the severance request.
Feds Investigating Sunbeam
The Justice Department is investigating Sunbeam Corp. for the period 1996 through 1998, according to published reports, citing a a bankruptcy court filing late Friday. During that time period, the appliance maker was headed by CEO Al Dunlap and CFO Russell A. Kersh.
“The U.S. attorney’s investigation focuses on the actions of former management and we don’t anticipate it will negatively impact our ability to reorganize by year’s end,” said George A. Davis, Sunbeam’s bankruptcy lawyer, according to wire service accounts.
Last week, CFO.com reported that Dunlap and Kersh settled charges brought by the Securities and Exchange Commission. Those chares accused the two former Sunbeam executives of filing financial reports that were “materially false and misleading.”
While neither admitting nor denying the allegations in the SEC suit, Dunlap agreed to pay a civil penalty of $500,000. Kersh agreed to pay $200,000. The two also agreed to be permanently barred from serving as officers or directors of a public company.
Bond Recovery Continues
With interest rates at their lowest levels since the Kennedy administration, the bond market continues to see a surge in underwritings.
On Monday, three companies issued nearly $1.5 billion of paper, mostly 10-year notes.
Utility Dominion Resources, for example, issued $520 million of 10-year notes priced at 170 basis points over comparable Treasurys. Utility Dominion’s paper was rated Baa1 by Moody’s and BBB-plus by Standard & Poor’s.
Teck Cominco Ltd., a mining company, issued $200 million of 10-year notes priced at 305 basis points over Treasurys. The debt was rated Baa3 by Moody’s and BBB by S&P.
And finally, Canadian Natural Resources Limited trotted out $700 million of paper in two tranches. Canadian Natural issued $350 million of 10-year notes priced at 142 basis points over Treasurys, and $350 million of 30-year bonds priced at 162 basis points over comparable Treasurys. The issues were rated Baa1 by Moody’s and BBB-plus by S& P. Reportedly, the company’s management initially was looking to raise $600 million, but upped that figure.
On Friday CFO.com noted that last week (through Thursday), $8.1 billion worth of bonds had been issued or announced, topping the prior week’s total of $7.3 billion, according to Bloomberg. Since July 1, the weekly average has been $5.8 billion.
No surprise, then, that Neuberger Berman Inc. is the latest money managers to launch a new high yield fund, the Neuberger Berman High Income Bond Fund.