RI Governance & Engagement, June 23: Record 109 proxies in 2011

RI’s regular review of governance and engagement news

Investors filed a record 109 shareholder resolutions with 81 US and Canadian companies on climate change, unconventional fossil fuel production and related sustainability risks and opportunities during the 2011 proxy season, according to Ceres, the environmental investment coalition that oversees the US Investor Network on Climate Risk. It said key shareholder successes include majority and near-majority votes with water infrastructure services company Layne Christensen (92.8%, sustainability reporting), oil company Energen Corporation (49.5%, fracking), electric utility Ameren (52.7%, coal ash) and oil company Tesoro (54.3%, oil refinery risk). Investors also withdrew 45 resolutions after the companies made positive climate change and energy-related commitments on resolutions. A complete list of the resolutions and lead filers can be found at: 2011 resolutions

The Canadian Coalition for Good Governance has published its latest Shareholder Democracy Study. Amongst other findings, it shows that by 2010, 70% of companies on the S&P/ TSX Composite Index of the largest companies on the Toronto Stock Exchange had appointed an independent chair, compared to just over one third in 2003. Link to study

Proxy advisory firm Glass Lewis says the remuneration committee at Tesco has “appropriately responded to shareholder concerns” over the pay of Tim Mason, CEO of the retailer’s US subsidiary Fresh & Easy. Tesco holds its annual meeting on July 1. Link

A proposal from Walden Asset Management calling for a sustainability report at drilling company Layne Christensen was approved at the company’s annual meeting this month – after the company advised shareholders to back the motion. Layne said: “The Board recognizes the importance to shareholders of environmental and social sustainability.” The proposal went through by 14.9m votes to 1.1m, after a similar proposal in 2010 achieved 60% support. Proxy

IKV Pax Christi says it met with Shell executives on June 17 to expresses its concerns about the oil major’s activities in Syria. The peace group had previously called on the company to exit the country following a wave of violence.

TEPCO, the Japanese energy firm at the centre of the Fukushima nuclear disaster, holds its annual general meeting on June 28 (subject to change). The Japan Proxy Governance Institute has urged shareholders to vote for a recurring proposal calling on the company to move away from nuclear energy. Of 17 new directors being proposed only one is an “outside” director, a former Vice Governor of Tokyo.

A commentary examining the reasons why Stichting Pensioenfonds ABP’s case against Wachovia relating to the subprime crisis was recently thrown out has been prepared by Nicolas Stebinger of US law firm Chadbourne & Parke LLP. “No matter how compelling the overarching narrative, claims of securities fraud must still be plausible and pleaded with particularity to survive a motion to dismiss,” Stebinger writes on the Lexicology website.Stephen Brown, TIAACREF’s Director of Corporate Governance is interviewed (with transcript) on the Forbes Executive Pay Watch blog here.

RepRisk, the environmental, social and governance (ESG) risk monitoring company, has released a report on five companies criticised for their involvement in the controversial hydraulic fracturing (“fracking”) of oil and gas. The companies are: Halliburton Co; Royal Dutch Shell; Chesapeake Energy Corp.; Exxon Mobil Corp. and Cabot Oil & Gas Corp. The report is here

Average investor support for shareholder resolutions on environmental and social issues at US annual general meetings continues to rise, according to proxy firm ISS. IT said that during the 2011 spring proxy season, there was 20.5% average approval for such motions – up from 18.2% a year ago.

The “seven myths” of executive pay have been identified by David Larcker, Director of the Corporate Governance Research Program at the Stanford Graduate School of Business. 1) CEO-average worker pay ratio is useful. 2) Pay consultants cause pay to be too high. 3) Plans that cause risk-taking are easily identifiable. 4) Performance targets in pay plans tie directly to strategy. 5) Eliminating discretionary bonuses is a good idea. 6) Proxy firms can evaluate compensation contracts. 7) The numbers in the financial statement for stock option expenses approximate their cost. Link

Three quarters of banks are not doing enough to establish the legitimacy of their customers’ source of wealth – some in situations where they have adverse information about their customer’s integrity – according to a report by the UK Financial Services Authority. The report looks at a number of bank risks regarding money laundering. Link to report

Norwegian authorities have indicted two companies owned by offshore drilling rig contractor Transocean Ltd and two tax advisers over suspicions of tax fraud, reports Reuters. Transocean is accused of having underpaid taxes by up to 10 billion Norwegian crowns ($1.8 billion) in 2000-2002, in connection with the sale of 12 oil rigs from Transocean’s Norwegian subsidiary to other company units in the Cayman Islands, according to the police unit that investigates economic crimes, Oekokrim. Transocean has denied the allegations.

Morgan Keegan, a Tennessee investment bank, will pay $210m to resolve civil US regulatory charges that it defrauded investors in five bond funds by inflating the value of mortgage securities during the financial crisis, reports the Financial Times. The deal with the Securities and Exchange Commission, follows a settlement earlier this week in which JPMorgan Chase agreed to pay $154m to resolve SEC charges related to the sale of collateralized debt obligations.

A draft directive suggests that the EU wants to impose mandatory quotas to force bank boards to have at least one-third female representation. Michel Barnier, Europe’s internal markets commissioner, has said he believes the change would help prevent the kind of “group think” often blamed for the global financial crisis. The proposals are contained in the 130-page draft of the latest capital requirements directive, known as CRD 4.