February 24, 2010

Bringing in the Vote: The Need to Get Creative

During our recent snow-in here, I spent some time pondering how to get more people to vote in corporate elections. As I blogged yesterday, I believe one necessary first step is enhancing the usability of communications to shareholders. But as we all know, even that will only improve shareholder participation on the margins.

As I struggled with this diIemma – so desperate I was perusing old Dale Carnegie books about how to win friends and influence people for inspiration – I just happened to hear from Peggy Foran about a novel program that Prudential is trying this proxy season. I think what they are trying is pure genius. By tying the act of voting to the environment & sustainability movement, the company is trying to make people feel good about themselves when they vote. It will be interesting to see how it pans out in practice.

In this podcast, Peggy and Ed Ballo of Prudential explain their company’s novel initiative that ties its environmental & sustainability program to bringing in the vote for its annual shareholders meeting (here are two items that will be used in Pru’s mailings: program notice postcard and proxy materials insert), including:

– How does Pru intend to engage registered holders this season?
– What exactly will be sent to registered holders?
– Is there an online component to this initiative?
– What are the benefits to the company of this initiative?

Speaking of getting creative, this is one of the more unusual promotions I’ve come across in a while, courtesy of Smith & Wollensky…

The Latest on Fairness Opinions

We have posted the transcript for the webcast: “The Latest on Fairness Opinions.”

Judge Reluctantly Approves SEC-Bank of America Settlement

A few weeks after the SEC announced it had settled (again) with Bank of America over its two actions against the company regarding alleged disclosure deficiencies in connection with BofA’s acquisition of Merrill Lynch (one action regarding bonus amounts; the other over operating losses), Judge Rakoff from the Southern District of New York ended his game of “will he or won’t he” and approved the settlement on Monday. As noted in this NY Times article, the Judge still expressed displeasure with the settlement – he called it “half-baked justice at best” – even as he issued this order.

Below is an excerpt from yesterday’s “Proxy Disclosure Blog” from Mark Borges that explains the changes to the SEC’s announced settlement:

As part of the Court’s order, he modified several of the remedial corporate governance and disclosure measures that BofA must follow for the next three years. Specifically, with respect to the requirements to engage an independent auditor to assess whether BofA’s accounting controls and procedures were adequate to assure proper public disclosures and to engage independent disclosure counsel to report solely to the audit committee on the adequacy of the bank’s public disclosures, the Bank’s choices must be fully acceptable to the SEC (not simply selected in consultation with the SEC), with the Court making the final selection if the parties cannot agree.

Interestingly, the Court also proposed that the selection of an independent compensation consultant to advise BofA’s compensation committee be made jointly by the compensation committee, the SEC, and the Court (rather than solely by the compensation committee) The Court gave the following reason for this suggestion:

The reason for this suggestion was the Court’s perception that too many compensation consultants have a skewed focus when it comes to executive compensation, concentrating on what they perceive is necessary to attract and keep “talent” (however defined), and more generally favoring ever larger compensation packages, while rarely taking account of limits that a reasonable shareholder might place on such expenditures.

However, in the face of BofA’s objection, the Court conceded the point, explaining that the matter should not be a “deal breaker,” especially in light of the “Say-on-Pay” vote that the Bank must conduct for the next three years.

While it’s possible that some of these remedial measures may be superseded by the legislative initiatives that are currently pending before Congress, the fate of these legislative proposals is still very much up in the air. Consequently, BofA’s disclosure practices may prove to be a very interesting “laboratory” over the next three years on the merits of these enhanced disclosure techniques.

Below is an excerpt from the NY Times’ article, noting that BofA still faces a battle with the New York Attorney General:

“The bank still faces a complaint filed last month by Andrew Cuomo, the attorney general of New York. The judge, after studying some of the evidence in Mr. Cuomo’s case, left room for that case to reach a different conclusion than the SEC’s.

In particular, the judge said the SEC had substantial evidence to support the bank’s claim that the dismissal of its general counsel, Timothy Mayopoulos, “was unrelated to the nondisclosures or to his increasing knowledge of Merrill’s losses.” That is the position the bank and its executives have argued since last spring, but Mr. Cuomo’s office asserts that the firing was related to advice from Mr. Mayopoulos.

Judge Rakoff said he had not determined which was right, but he said he was comfortable that the SEC’s conclusion was reasonable. “It is important to emphasize, with respect not just to the Mayopoulos termination but with respect to all the events that the attorney general interprets so very differently from the SEC, that the court is not here making any determination as to which of the two competing versions of the events is the correct one,” the judge wrote.

Mr. Cuomo’s complaint differs from the SEC’s in that it charges the bank as well as its former chief financial officer, Joe Price, and the chief executive, Kenneth Lewis, who retired early in part because of the mounting investigations into the merger.”

– Broc Romanek