RI Governance & Engagement, Dec. 15: US pension funds take on drilling firm Nabors over pay

RI’s regular look at governance and engagement news

A group of nine US public pension funds has filed a shareholder resolution asking the board at energy-drilling company Nabors Industries to grant long-term shareholders the right to nominate directors. “Expropriating the corporate treasury to fund egregious CEO pay packages at shareholder expense is both a symptom and a consequence of Nabors’ entrenched board,” said New York City Comptroller John Liu, who submitted the proposal on behalf of the City’s five pension funds.

The Dutch Finance Ministry wants to introduce a more punitive tax rate on Dutch banks which pay their executives excessive bonuses from next year, according to a Reuters report. A new bank levy, expected to raise about €300m a year, will be 5% higher if the bank pays its directors bonuses that are more than 100% of annual salary.

The Club de Excelencia en Sostenibilidad, the Spanish business association, has formed a Corporate Governance Commission in collaboration with law firm Garrigues. It will be directed by Javier López‐Galiacho, Corporate Responsibility Director of infrastructure firm FCC (Fomento de Construcciones y Contratas SA). Link

The Securities Commission of Malaysia is developing a standardised corporate governance ranking for listed companies, according to national news agency Bernama. It quoted Deputy Minister of International Trade and Industry, Datuk Jacob Dungau Sagan, as saying the initiative was meant for adoption by the ASEAN countries. “The pilot year, expected in the first quarter of 2012, will include the 30 top PLCs from each participating country,” he said.

Shareholders who supported, with a 94.5% vote, the Royal Bank of Scotland’s acquisition of Dutch rival ABN AMRO in 2007 “must themselves share some of the responsibility” for the ensuing problems at RBS, according to a lengthy report on the failure of RBS put together by the UK’s Financial Services Authority.

There’s been a development in the potentially huge class action case being brought by investors against major banks alleging they manipulated the key LIBOR benchmark interest rate. Federal Judge Naomi Reice Buchwald has consolidated 20 class complaints and appointed interim class counsel. Michael Hausfeld of Hausfeld LLP, one of the firms chosen, was quoted by Law.com as saying the damages could run into trillions of dollars.US socially responsible advisory firm Harrington Investments says it has filed shareholder resolutions calling on Citigroup, Bank of America, and JP Morgan Chase to stop indemnifying directors against civil and criminal liabilities. “The next time one of these banks commits a crime, their directors would not automatically have their defense paid for with shareholder funds,” said Chief Executive John Harrington. Link

Sweden’s financial regulator Finansinspektionen has rapped Nordea Bank and Nordea Investment Management for “deficiencies” in their bonus structures and imposed a fine of SEK3m (euro). “The companies have not deferred parts of their variable remuneration to risk-takers as required by the regulations,” FI said.

The Financial Reporting Review Panel, the UK watchdog, says one of its priorities for 2012/23 will be to “pay particular attention to the reports and accounts of companies whose shareholders have raised concerns about governance”. Panel Chairman Bill Knight said: “Transparency is vital. If risks and uncertainties can be clearly explained, much will have been achieved”.

The Council of Institutional Investors (CII) has written to the American Bar Association saying it is “deeply disappointed” with the ABA’s decision to reject the CII’s request to consider amending the Model Business Corporation Act (MBCA) to provide for majority voting as the default rule in director elections. The Council, a non-profit association whose members’ combined assets exceed $3trn, called on the ABA to “promptly reconsider its decision”. Link
ABP, the largest Dutch pension fund, has sued banking giant J P Morgan Chase, alleging violations of securities laws and fraud involving sales of residential mortgage-backed securities, according to reports. The suit was filed in New York state court in Manhattan; it accuses the bank of negligent misrepresentation. ABP sued Deutsche Bank over similar allegations in September.

KLP, the Norwegian institutional investor, has sent an enquiry to fertilizer firm Yara International over its new Brazilian phosphate venture with Morocco’s state-owned OCP SA. KLP wants to know how the Western Sahara situation – in the headlines following the Government Pension Fund’s actions this week – is addressed in the joint venture agreement.