How Badly Must a C.E.O. Behave Before His Pay Is Clawed Back? – The New York Times

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[There is] a lawsuit unfolding in Delaware Chancery Court…that involves the former chief executive of United and a prime figure in the Bridgegate scandal that has dogged Gov. Chris Christie of New Jersey. The facts of the case reflect a similar disdain for United’s shareholders by the corporate board members who are supposed to serve them.

At the heart of the lawsuit is the refusal by United’s directors to retrieve any of the $28.6 million received by Jeffery A. Smisek, United’s former chief executive, when he was defenestrated in 2015 amid a federal corruption investigation….In a litigation demand, [The City of Tamarac, Fla., Firefighters Pension Trust Fund] requested that the company’s board claw back the severance pay given to the executives who took part in the bribery scandal. By doing so, United’s board would correct its breach of fiduciary duty and prevent “the unjust enrichment” of company executives.

Seems fair enough. But United’s board has refused. Its justification for not recouping the pay is, well, pretty rich.

In a letter to the pension fund, a lawyer for United explained that it would harm the company to give the board “unfettered discretion to recoup compensation” in cases involving wrongdoing. “Where such discretion is out of step with industry norms,” the letter said, it would “make it difficult for United to recruit and retain top talent, particularly at the senior management level.”

In other words, clawing back severance awarded to executives amid a bribery investigation is not industry practice. And if United pursued such a recovery, the airline would be an outlier and unable to hire good people.

“Free Market” Shareholder Proposal on Lobbying Disclosure at Caterpillar

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A shareholder proposal on disclosing of lobbying priorities from the right-wing the National Center for Public Policy Research’s Free Enterprise Project:

At this week’s Caterpillar annual shareholder meeting, the National Center for Public Policy Research’s Free Enterprise Project (FEP) is asking company investors to support FEP’s shareholder resolution asking the heavy equipment manufacturer to report on how and why it chooses its lobbying priorities.

“After eight years of President Obama’s regulatory overreach, high corporate taxation and executive actions that hampered growth and led to America’s worst economic recovery since the 1930s, we finally have a president willing to work with business leaders on a pro-growth agenda. President Trump is showing an eagerness to increase American manufacturing and bring jobs back to America,” said National Center General Counsel and FEP Director Justin Danhof, Esq. “Our shareholder proposal urges Caterpillar to capitalize on the current political climate to advance the company’s goals and improving shareholder value.”

Pension Funds Vote “No” on Mylan Directors

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Frank Glassner’s Compensation in Context newsletter reports:

Four large pension funds have asked shareholders of the drug company Mylan NV to vote against six directors, including the company’s chairman, who have been nominated for re-election at the company’s annual meeting June 22.
“We believe the time has come to hold Mylan’s board accountable for its costly record of compensation, risk and compliance failures,” said the letter to shareholders, a copy of which was filed recently with the Securities and Exchange Commission.


The letter was signed by Scott Stringer, the New York City comptroller, on behalf of the $170.6 billion New York City Retirement Systems for which he is fiduciary to the five funds within the system; Thomas DiNapoli, the New York state comptroller and sole trustee of the $192 billion New York State Common Retirement Fund, Albany; Anne Sheehan, director of corporate governance for the $206.5 billion California State Teachers’ Retirement System, West Sacramento; and Margriet Stavast-Groothuis, adviser, responsible investment, for the €205.8 billion ($230 billion) Dutch pension provider PGGM, which manages the assets of the €185 billion Pensioenfonds Zorg en Welzijn, Zeist, Netherlands.


Collectively, the pension funds own approximately 4.3 million shares of Mylan stock, worth about $170 million, said the letter to shareholders.

UK: Shareholders need greater power to curb board directors’ pay, says IoD | The Independent

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Shareholders need more power to curb director pay if companies are to rebuild public trust. That’s the conclusion of the Institute of Directors (IoD), which has been calling upon the next government to give investors a greater say over executive pay at Britain’s biggest companies.Right now shareholders have a binding vote on the company’s future pay policy every three years. However, the IoD believes it’s time to strengthen their hand. It has suggested that if 30 per cent or more investors oppose the plans, then companies should revisit their pay policy and give shareholders another vote.

Source: Shareholders need greater power to curb board directors’ pay, says IoD | The Independent

Perk Disclosures: Reminders for Executives and Directors

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The lesson from this: If you’re going to have your corporation underwrite your cosmetic surgery, remember to declare it as a perk and part of your executive compensation.

The investigation into the perks, personal expense reimbursements and other items of value received by Mr. [Miles] Nadal [of MDC Partners, Inc.] or his management company from 2009-2014 ultimately revealed that Mr. Nadal received far more benefits than were disclosed in MDC’s proxy statements—ranging from sports car and yacht expenses to cosmetic surgery to charitable donations in his name—totaling nearly $11.285 million, which Mr. Nadal also repaid to MDC. On May 11, 2017, without admitting or denying the SEC’s findings of securities law violations, Mr. Nadal consented to an SEC cease-and-desist order and he agreed to pay $1.85 million in disgorgement, $150,000 in interest and a $3.5 million penalty. Mr. Nadal also agreed to be barred from serving as an officer or director of a public company for five years.

Source: Perk Disclosures: Reminders for Executives and Directors

Breaking the Ice: Investors Warm to Climate Change

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A few years ago, climate change was a fringe issue. Ignored by mainstream investors, environmental resolutions were lucky to receive 5 percent support. Now, issuers who try to ignore the associated risks could face serious financial consequences.

The victory of Occidental’s shareholders was arguably the result of a perfect storm. Over the past few years, climate change resolutions have become increasingly sophisticated. Where once they tended to be overly prescriptive and confrontational, they now aim to appeal to all parties involved.Many resolutions exploit investors’ fiduciary obligation to act in the best interests of their clients by emphasizing the relevance of the disclosures being requested. Recent climate change proposals also make more of an effort to placate companies. Indeed, by being more general, and in many cases advisory, most current proposals rely on investor support to pressure companies into implementing what they want.

Source: Breaking the Ice: Investors Warm to Climate Change

Investors expect to meet with Exxon on climate-impact report | Reuters

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Exxon Mobil Corp investors will push to meet with oil company officials this summer to hash out elements of a climate-impact analysis following a shareholder vote calling for studies of technology and climate-related risks to its business.Exxon has said that it will reconsider its opposition to the request, not that it would begin discussions or initiate new studies. The shareholder proposal, filed by 54 groups including financial, religious and corporate governance activists, won the support on Wednesday of 62 percent of Exxon holders.

“I anticipate we’ll be having a meeting this summer,” said Tracey Rembert, assistant director of Catholic Responsible Investing at Christian Brothers Investment Services, one of the 54 co-filers.The White House’s decision on Thursday to withdraw from the Paris agreement on climate change has no bearing on the proposal. “We expect the scenario assessment will start to be done quickly at Exxon,” Rembert said.

The investors behind the proposal routinely met in past years with Exxon between December and February to discuss annual meeting proposals, she said. Earlier discussions because of the majority vote are in order.

Source: Investors expect to meet with Exxon on climate-impact report | Reuters

Facebook, Apple, Google and Amazon are joining a campaign to support the Paris climate accord – The Washington Post

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Apple, Amazon, Facebook and Google are among hundreds of U.S. businesses joining an effort to support the Paris climate agreement as part of a public campaign announced Monday. Dubbed “We Are Still In,” the launch of the initiative comes just days after President Trump said the United States would withdraw from the international accord, stunning much of the world and breaking with a broad host of industry executives who supported the deal.The campaign’s participants, which also include hundreds of investors, universities, local officials and state governments, have pledged to support the Paris accord and “pursue ambitious climate goals,” according to an open letter the campaign released.

Source: Facebook, Apple, Google and Amazon are joining a campaign to support the Paris climate accord – The Washington Post

Paris Agreement: Why Business Opposes Trump’s Withdrawal | Fortune.com

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Alan Murray writes in Fortune:

President Trump announced yesterday he will withdraw the U.S. from the Paris agreement on climate change. That’s nothing new for a Republican president—George W. Bush steered clear of the Kyoto Protocol. But what’s changed in the last decade is the position of business. This time, a long list of CEOs urged the President to stay in the agreement. That not only included the left coast crowd—Apple CEO Tim Cook called the White House to lobby Trump, and Tesla’s Elon Musk quit the President’s advisory council after the announcement (as did Disney’s Robert Iger)—but also the likes of ExxonMobil CEO Darren Woods. GE’s Jeff Immelt and JP Morgan’s Jamie Dimon also dissented, while Goldman Sachs’s Lloyd Blankfein pointedly chose the President’s favorite medium, Twitter, to slam the decision (it was Blankfein’s first tweet since he joined the network six years ago).

Today’s decision is a setback for the environment and for the U.S.’s leadership position in the world. #ParisAgreement- Lloyd Blankfein (@lloydblankfein) June 1, 2017

Nick Akins, the head of American Electric Power—long one of the nation’s top coal consumers—typifies the change in business attitudes on climate change. In an interview with Fortune’s Susie Gharib, he argued that the U.S. should stay engaged in global climate agreements, and said Trump’s talk of reviving the coal industry was not realistic.

Source: Paris Agreement: Why Business Opposes Trump’s Withdrawal | Fortune.com

Japan’s ‘Show Me The Money’ Corporate Governance

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John Vail writes in Forbes that improvements in Japanese corporate governance have led to increased profitability.

[W]hile increasing the number of independent directors and other recent governance issues are very important in the intermediate term for Japan, it is crucial for investors to understand that the profitability message has actually been understood by most Japanese corporates for over a decade. This is shown by the divergence in the profit margins from the trend in GDP growth in the charts above, showing that even though GDP growth has remained subdued, profit margins have surged.

Source: Japan’s ‘Show Me The Money’ Corporate Governance