Scott Stringer, the New York City Comptroller, is an unlikely zombie killer.
But by leading a powerful investor coalition with hundreds of billions of dollars in assets called the Boardroom Accountability Project (BAP), to end what he dubs “zombie directors” – unelected but still serving – he may become just that: the scourge of what the investors say are the living dead of corporate boards. The BAP coalition includes the $160bn in assets from the five New York City pension funds that Stringer oversees, plus CalPERS, America’s biggest pension fund with $301.5bn (€243.3bn) in assets, and similar large public employee pension funds in the states of Illinois, Florida, Connecticut, Missouri and North Carolina. Link to RI story on BAP
RI Americas 2014
Stringer is a Keynote Speaker at next month’s RI Americas 2014 Conference in New York on December 9/10.
In this Q&A, he speaks to RI about the Boardroom Accountability Project ahead of the conference:
The Boardroom Accountability Project has filed so-called “proxy access” proposals at 75 listed companies to end the practice of companies automatically installing their own candidates to the board – even in instances where a majority of shareholders oppose them. Proxy access gives shareholders the right to nominate their own board candidates for one-quarter of the board if they hold 3% of the company’s stock for at least three years. The companies targeted by the BAP include 33 from the fossil fuel industry, which, the coalition says, are not addressing climate change risks, 34 that have little or no board diversity, and 25 that received considerable shareholder opposition in 2014 to executive pay plans. Among the more prominent companies on the list are US oil giants ExxonMobil and Chevron, Paccar, the truckmaker and Netflix, the online video-streaming firm.
Responsible Investor: “Thank you for taking the time to speak with us.”
Comptroller Stringer: “It’s my pleasure. I’m looking forward to speaking at the Responsible Investor conference next month.Responsible Investor: “Can you talk us through the rationale for the Boardroom Accountability Project, and your intentions?”
Comptroller Stringer: “The Boardroom Accountability Project is a national movement to give shareowners a true voice in how corporate boards are elected. We’ve seen how unaccountable corporate boards have been in failing to rein in abuses: Enron, World Com, Lehman Brothers, AIG, etc. Friends of friends still get on to boards and make decisions that aren’t in the long-term interests of shareowners and the project promises to transform that dynamic between shareowners and corporate boards by giving investors real power to nominate company directors using the company’s ballot, which is known as proxy access.
We’re targeting 75 companies across an array of industries from ebay to Exxon, and we intend to bring systemic change to the boardroom that will make companies more responsive to shareowners and improve performance over the long haul.”
Responsible Investor: “Have you had any response from the companies that you have targeted?
Comptroller Stringer: “We’re getting a lot of calls! There is definitely a dialogue going on between the companies we have filed with. That’s what the goal is. This is a very large coalition now. It’s not just the New York City Comptrollers office. This is about CalPERS, CalSTRS and other long-term investors coming together and saying that we want to have an opportunity, where necessary, to ballot.
Responsible Investor: “How will the process work in practice?”
Comptroller Stringer: “Investors have to have 3% collectively of a company’s stock, and be invested for three years. It’s not going to lead to an earth-shattering election process. It’s going to be a tool that I think will make companies understand that they have to look for directors who are diverse, and that are not part of a buddy system.”
Responsible Investor: “Will you as the investors nominate the directors?”
Comptroller Stringer: “We could. Right now the logistics of running elections are expensive and there is a lot of thought that goes into ballot access. But the first step is having the ability to request proxy access at all!
Our proposal would only at most impact just 25% of the board, so we’re not looking to take control. We recognise and understand the power of the directors and that this is what makes corporate America what it is. At the same time, there should be a window opened. I happen to think that the SEC could solve a lot of this by implementing a universal proxy access rule, which I think would go a long way. But we’re going to go company by company if we have to.
Responsible Investor: “There’s been a lot of resistance by companies in the past to proxy access. Do you think that is changing?”
Comptroller Stringer: “I think that people understand that having the ability to place a director on a board from time to time makes a company more responsible.
Responsible Investor: “Can you talk us through the three issues you are majoring on via the proxy access resolutions?”
Comptroller Stringer: “As a long-term investor via the pension funds, I am concerned that a lot of fossil fuel companies have to plan for more environmental friendly strategies to keep them strong in the long term.Coal is quickly becoming something that may not be a powerful investment and I want to be able to urge companies that we have investments in to take a look at that. I’m also very concerned about board diversity: study after study shows that when you have different types of people on a board you get a better board. What we are saying on CEO ‘excessive’ pay is that we want boards to work for the shareowners and not just the CEO. Where you see a pattern of excessive executive pay it’s an indication that not everyone is watching the store. It’s a leading indicator. More broadly, research by the CFA shows that the enactment of a proxy access rule could mean that US companies are worth up to $140bn more. My job as Comptroller is to look at value, and proxy access is about the value of our holdings.”
Scott Stringer, the New York City Comptroller, is a Keynote Speaker at RI Americas 2014 in New York on December 9/10. Click here for details.