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The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win. Our affiliates' six million members participate in public and Taft-Hartley pension funds with approximately $1.5 trillion in assets. The CtW Investment Group blog chronicles the latest developments in corporate governance and shareholder activism, with a specific focus on CtW Investment Group initiatives to increase long-term shareholder value through active ownership.
This page contains all entries posted to CtW Investment Group Blog in April 2008. They are listed from newest to oldest.
Financial Week - Broker vote zaps shareholder might: Activists say retail brokerages provided majorities for WaMu directors; NYSE rule change still MIA. [Jeff Nash, April 28, 2008]
"The controversial practice of broker voting is once again in the spotlight, thanks to Washington Mutual's highly contentious annual shareholder meeting earlier this month."Christian Science Monitor - Proxy ballots: your chance to make a difference Don't toss that envelope. Shareholder resolutions address issues ranging from executive pay to human rights. [Steve Dinnen, April 28, 2008]
"With this year's proxy season in full swing, investors are demanding an explanation of loans that not only hurt home buyers but also trashed the balance sheets of many companies that provided the funds."CtW Investment Group, for one, is suggesting that union pension plans it advises vote against certain directors of huge financial-services concerns tied to the foreclosure crisis."
Posted by on April 28, 2008 1:56 PM
Shanny Basar of Financial News writes:
“Merrill Lynch is proposing that from next year all board members are elected annually for one-year terms following a campaign led by CtW Investment Group, an umbrella body representing union pension funds, against banks that have written down billions of dollar related to the credit crisis.“In January, CtW Investment Group had written to four Merrill directors asking them to describe what they did to protect shareholders from excessive mortgage-related risk over the past two years.”
The declassification was also received coverage by CNNMoney.com, Forbes, Business Week, and TheStreet.com.
Posted by on April 25, 2008 10:08 AM
From a Merrill Lynch press release (April 24, 2008):
"The Board of Directors regularly reviews its governance practices to ensure it is operating efficiently, effectively, and in the best interests of shareholders," said John Thain, chairman and chief executive officer.
"In discussions with investors, including recent conversations with CtW Investment Group, we have shared the board's growing consensus that annual director elections are becoming a best practice. Today the board agreed to move to this approach next year. Annual director elections will ensure that our investors have a regular opportunity to express their confidence in the performance of the board and management."
Posted by on April 25, 2008 9:42 AM
Yesterday both the California Public Employees' Retirement System and the California State Teachers’ Retirement System announced executive shake-ups.
At CalPERS, the Chief Investment Officer Russell Read announced he was leaving, to “pursue his long-standing interest in investing in companies that are developing environmentally friendly technologies,” Read will be replaced for the interim by Anne Stausboll, CalPERS Chief Operating Investment Officer.
CalSTRS yesterday announced that it had appointed a new head of corporate governance.
Michael McCauley comes from the Florida State Board of Administration and currently co-chairs CII’s International Corporate Governance Committee as well as serving as a member of the Public Company Accounting Oversight Board’s Standing Advisory Group.
McCauley will help CalSTRS expand their engagement with “international corporate governance issues and examining the relationship between executive compensation and corporate performance.”
Posted by on April 24, 2008 9:59 AM
In a piece today in the New York Post, Kaja Whitehouse reports that “letters are pouring in to WaMu Chairman Kerry Killinger and other board members” on the broker vote issue.
She reports: “Among those crying foul are pension funds from California, Florida, New Jersey and North Carolina, including the granddaddy of all pension funds, the $255 billion California Public Employees Retirement System and the $80 billion New Jersey Division of Investment.
“Several union pension funds are leading the charge, and the Council of Institutional Investors, which represents 140 public, private and union pension funds, is also drafting a letter on this issue, to be released today.”
Posted by on April 24, 2008 9:46 AM
Watch Mike Garland, CtW Investment Group's director of value strategies, discuss shareholder activism on Fox Business News.
There's also a written piece on shareholder activism around the subprime meltdown.
Fox Business reporter Dunstan Prial writes:
"For most of this decade, incremental change has been seeping into corporate board rooms as investment managers at mutual funds and pension funds have demanded that voting policies for board elections reflect the growing desire for reform."More and more companies are adopting majority vote policies for their boards, according to [Mike] Garland, and shifting away from the 'anachronistic methods' that decisively favored the whims of company executives and existing board members.
"'Other institutions are watching,' Garland said. 'We are part of a community of long-term shareholders that are leading the fight to enhance the independence and accountability of corporate directors.'"
Posted by on April 23, 2008 10:59 AM
It's been brought to my attention that CtW Investment Group's Director of Value Strategies Mike Garland was quoted in a column about online shareholder activism in the Sunday Washington Post.
In her Kiplinger's Personal Finance column, Anne Kates Smith writes that "shareholders big and small are putting corporate boards on the hot seat, expressing their views on everything from executive pay to the subprime-mortgage meltdown. The CtW Investment Group, which is affiliated with a coalition of labor unions, wants board members at six financial firms, including Citigroup and Merrill Lynch, to explain what they did to manage subprime-loan risks. Says CtW's Mike Garland: 'Absent compelling explanations, we'll recommend that shareholders vote against reelection.'"
Posted by on April 22, 2008 8:03 AM
In a column that ran on the AP Newswires this weekend, Neal Lipschutz, the senior vice president and managing editor of Dow Jones Newswires, agrees with CtW that the SEC should take action to eliminate the broker vote. In the column, titled, "If majority to rule, 'broker vote' must go,” Lipschultz writes:
“Only people who have decided to vote and who are the direct owners of a company's shares should have a say in who represents them on the board of directors.“That isn't now the case. In a testament to how long some corporate governance controversies can bounce around, the so-called 'broker vote' issue is still alive if not altogether well after years of debate. It should have long ago been relegated to history. Instead, it's become part of a high-profile debate between activist shareholders and the big thrift Washington Mutual Inc.”
Posted by on April 21, 2008 10:12 AM
In this week’s Risk & Governance Weekly Ted Allen reports that the Council of Institutional Investors (CII) plans to send a letter asking WaMu to exclude broker votes from their director election totals.
“WaMu is Exhibit A for this proxy season ... of how broker votes are a thumb on the scale for management," CII Deputy Director Amy Borrus told R&GW.
Allen reported that CII will also pressure the SEC to take action on the broker vote issue.
Posted by on April 18, 2008 12:06 PM
“U.S. investor rights advocates are stepping up calls for reforms of corporate director elections, saying regulators should bar ‘legalized ballot-box stuffing’ by stock brokers who vote without instructions from their clients.” Reuters, Lifting the Lid: Activists Renew Calls For Barring Broker Votes
“The U.S. Securities and Exchange Commission's failure to act on a broker-voting rule has 'disenfranchised' investors by triggering the re-election of two Washington Mutual Inc. directors, a group that advises union-pension funds said.” Bloomberg, SEC Inaction on Broker-Votes Affected WaMu Election, Group Says
“Union pension advisers, after achieving mixed results in their battle to oust directors at troubled thrift Washington Mutual Inc., are taking the next stage of their fight to the Securities and Exchange Commission.” Daily Deal, CtW Asks SEC To Rule On Broker Votes
“CtW Investment Group urged Securities and Exchange Commission Chairman Christopher Cox to approve a proposal by the New York Stock Exchange to eliminate uninstructed broker votes in all director elections.” CNNMoney.com, CtW Investment Group Urges SEC To Eliminate Broker Votes
“In majority-vote elections, some directors have been re-elected by the margin provided by the uninstructed broker votes, prevailing over shareholders who would otherwise have had enough votes to defeat nominees, Mr. Patterson pointed out.” Pensions & Investments, SEC Asked To Stop Unguided Broker Voting
And on the blogs:
“Kudos to CtW Investment Group for bringing the issue of broker votes back to the forefront with their well-publicized letter to SEC Chairman Christopher Cox…It’s time for the SEC to recognize the 21st century demands of investors and give broker votes the death sentence.” Proxy Matters Blog, Death To Broker Votes
Posted by on April 18, 2008 11:12 AM
Today, in a letter to SEC Chairman Christopher Cox, the CtW Investment Group urged prompt approval of a longstanding NYSE proposal to eliminate uninstructed broker votes in all director elections. CtW pointed to WaMu’s annual meeting on Tuesday, where Director-nominees James Stever and Charles Lillis failed to garner majority shareholder votes, yet will be seated because broker votes were counted towards their totals.
“With rising levels of shareholder opposition to directors in uncontested elections, it is essential that the SEC eliminate broker votes before shareholders are disenfranchised yet again,” said CtW Investment Group Executive Director William Patterson. “Nearly eighteen months after the NYSE proposal was submitted, we cannot understand why the SEC has not even put it out for public comment.”
Last year, calls for the SEC to act on the 2006 NYSE proposal increased after CVS/Caremark Director Roger Headrick was re-elected only because of broker votes (Mr. Headrick later resigned).
Since most brokers support management as a matter of policy, their ability to exercise discretion over certain uninstructed client shares has been criticized as “legalized ballot stuffing” by parties who don’t share investors’ economic interests.
For more information on the broker vote issue, check out a piece in the Wall Street Journal by Kara Scannell ['Broker Votes': Opponents May Win One," WSJ, 6/13/07, no link].
In the piece, Scannell examines the controversy surrounding broker votes:
"Complaints about the system go back for years. In 2003, the proxy advisory firm Institutional Shareholder Services said that the system was hurting investors' ability to express dissatisfaction. At Tyco International Ltd. and Sprint, now Sprint Nextel Corp., ISS said, unhappiness with the companies' boards was "watered down by broker votes."
...
"Already, NYSE Euronext's New York Stock Exchange has proposed amending the broker-vote rule. It would redefine director elections as "non routine," no longer allowing brokers to vote shares without instruction. At the same time, the Securities and Exchange Commission is reviewing the entire voting system, from allowing companies to send proxies to shareholders over the Internet to allowing shareholders to nominate their own directors on corporate ballots. The NYSE rule change would require SEC approval."
Posted by on April 17, 2008 9:50 AM
The removal of Mary Pugh from Washington Mutual’s board shows that the reforms intended to improve corporate governance and increase shareholder accountability in the U.S. have successfully empowered institutional investors to affect change at companies they own.
News clips highlighting the significance of Pugh’s resignation:
Financial Week: Analysis - Activist shareholders starting to make inroads
“The surprise resignation yesterday of a Washington Mutual director is the latest sign that activist shareholders are actually having some impact on the way companies are run…This renewed focus on board accountability isn’t likely to die out anytime soon. Indeed, corporate boards that have been targeted by activist campaigns should be prepared for a tough fight.”
Financial Times: WaMu Board Director Forced Out
“The resignation of Mary Pugh, who chaired WaMu’s finance committee, represents a big victory for shareholder groups seeking boardroom accountability for the massive mortgage-related losses that have plagued the largest US banks and brokerage houses in recent months…Corporate governance experts said the resignation was a major victory for the union-backed coalition.”
BusinessWeek: Shareholders Score at WaMu
“Is today’s WaMu meeting a tipping point for shareholder success? It’s too early to tell, but WaMu’s succumbing to executive pay criticism, the departure of Mary Pugh, and the high vote on the CEO-Chairman role is indicative of a new era of shareholders’ weight in the often arcane world of corporate governance.”
Portfolio: Activists Claim a Scalp
“Shareholder activists have made a lot of noise but have not been able to point to many changes this proxy season—until today. Mary Pugh, a member of the board of Washington Mutual for nine years, has resigned.”
Forbes: Blood on the Floor at WaMu
“Activist shareholders who were pushing to oust WaMu's finance committee chairwoman, Mary E. Pugh, had something to celebrate. The bank said Pugh had resigned from the board. CtW Investment Group, part of the Change to Win federation of U.S. labor unions, has been leading an effort to hold Pugh and other executives accountable for not seeing the writing on the wall leading up to the mortgage meltdown.”
Posted by on April 16, 2008 3:09 PM
A few of our favorite pieces:
Financial Week: Union Activists Win One, as WaMu Director Resigns
Wall Street Journal: WaMu Revises Pay Plan and Divides Top Post as Holders Press Change
Financial News: Activists Win Victory at Washington Mutual
TheStreet.com: WaMu Director Resigns Under Pressure
International Business Tribune: WaMu Finance Chair Resigns Under Pressure
Puget Sound Business Journal: WaMu Director Quits, Others Voted Down
Salon: Washington Mutual's Bad Day
Posted by on April 16, 2008 11:24 AM
CtW calls for resignations of James Stever and Charles Lillis
Washington, DC - Pointing to unofficial election returns showing that shareholders rejected two additional WaMu Directors, James Stever and Charles Lillis, the CtW Investment Group called on the WaMu Board to immediately release full election results and demand the resignation of any directors who failed to win majority shareholder votes.
“Washington Mutual shareholders sent an unequivocal message today that they are ready for more independent and accountable Directors,” said CtW Investment Group Executive Director William Patterson. “While we commend Washington Mutual’s Board for promptly accepting Mary E. Pugh’s resignation, we believe that Charles M. Lillis and James E. Stever also failed to win re-election. The Board should immediately disclose detailed election returns, and should demand the resignation of any Directors who failed to win majority support, excluding broker votes.”
The letter cites preliminary election returns showing that shareholders withheld 51.2% from Mr. Lillis, 61.9% from Ms. Pugh, and 50.9% from Mr. Stever. CtW had urged shareholders to withhold from Pugh in response to risk management failures and from Stever in response to poor executive compensation practices. AFSCME also urged withholds from Stever and Lillis.
Posted by on April 15, 2008 7:40 PM
CtW Investment Group Executive Director William Patterson released the following statement in response to Mary Pugh’s resignation from the Washington Mutual’s board:
“Shareholders at Washington Mutual sent an unequivocal message today that they are ready for more independent and accountable Directors. We commend Washington Mutual’s Board for promptly accepting Ms. Pugh’s resignation and urge them to also demand the resignation of any other Directors who fail to win majority shareholder support.”
Click here to see WaMu's press release announcing Pugh's resignation.
Posted by on April 15, 2008 4:34 PM
Drew DeSilver wrote a lengthy analysis of WaMu in the Seattle Times yesterday, a company he described to be “in full crisis mode.”
“Billions of dollars in tarnished debt sit festering on WaMu's books. The stock is down 71 percent over the past year, thousands of employees have been laid off, and just last week WaMu effectively sold half of itself to an investor group at a bargain-basement price.”
While WaMu executives, DeSilver writes, “blame the company's troubles on the rapid unraveling of the U.S. housing boom last year,” his review of internal documents and interviews with former employees and financial analysits suggest that “WaMu's crisis is largely of its own making.”
Posted by on April 15, 2008 11:47 AM
Click here to listen to CtW Investment Group's Research Director Rich Clayton speak about WaMu on NPR this morning.
Posted by on April 15, 2008 11:32 AM
On CNBC's Squawk Box this morning, CtW Investment Group's Executive Director Bill Patterson talks about our expectations for today's Washington Mutual annual meeting.
Posted by on April 15, 2008 9:50 AM
Washington, D.C. and Seattle, WA – Citing preliminary vote tallies, the CtW Investment Group sent a letter to the WaMu Board demanding that they request the resignation of any Directors who fail to win a majority vote, excluding broker votes, at tomorrow’s annual meeting.
“Reports that WaMu spurned a takeover offer from JPMorgan in favor of a TPG deal that permits current management to stay in place underscore the need for a strong, independent and accountable Board that will put shareholder interests first,” said CtW Investment Group Executive Director William Patterson. “Washington Mutual Directors must not hide behind broker votes to improperly seat Directors who do not win the support of the shareholders.”
The CtW Investment Group has urged shareholders to withhold from Directors Mary Pugh and James Stever based on their respective failures to independently oversee risk and maintain the link between pay and performance.
Under current NYSE rules, brokers may vote on behalf of certain shareholders in director elections. Last year such votes accounted for over 19% of the total at Washington Mutual. Given their potential to distort election results, the NYSE has attempted to change its rules to eliminate broker votes in director elections, but the SEC has so far failed to act on the proposal.
Posted by on April 14, 2008 5:28 PM
Today the Wall Street Journal ran a BreakingViews piece by Lauren Silva, Rob Cox and Dwight Cass on WaMu’s cash infusion from TPG:
“From the get-go, Washington Mutual's $7 billion capital injection looked like a sweetheart deal for private-equity firm TPG and a few privileged investors. As further details come to light -- late Friday, WaMu slipped out specifics of the transaction announced Tuesday -- it looks simply outrageous."
According to the piece, WaMu has agreed to sell 176 million shares at $8.75 apiece, a 20% discount to Friday's closing price of $10.95, $5.7 billion of securities at the same discount, and the right to buy close to 68 million shares at $10.06 each.
Over the weekend, Jessica Mintz from the Associated Press and Kristen Grind from Business Journal also had pieces on the director accountability initiative at WaMu.
Posted by on April 14, 2008 11:43 AM
“Off With Their Heads!” is the title of Liz Moyer’s recent piece in Forbes on subprime director accountability initiatives.
In the article, Moyer discusses the “vote no” initiatives at WaMu, Citi and Morgan Stanley, but she also writes more generally about the building momentum for the good governance practice of splitting the roles of board chairman and chief executive.
Moyer notes:
“A board's role in overseeing risk management is just one of several concerns that have gained more prominence this proxy season…Among other corporate governance concerns likely to gain additional credibility now is the idea of splitting the roles of chairman and chief executive. This is an idea that has taken off in large companies. According to RiskMetrics Group, which owns ISS, 37% of companies had separate chairmen and chief executives last year, up from 30% in 2005.
“So far, there are 20 shareholder proposals this year seeking an independent board chairman, including those on ballots at Bank of America, Citi and Wells Fargo.
“Citigroup, in ousting Prince last year, split those roles between Win Bischoff, a senior banker--in its London offices--who is chairman, and Vikram Pandit, its chief executive who joined the company last spring when it bought his hedge fund.
“Bear Stearns split its top spots in February when James Cayne stepped aside as chief executive to make way for Alan Schwartz.
“Nine other major banks still have combined roles, however, including Merrill Lynch, which ousted E. Stanley O'Neal last fall and brought in John Thain as its new chairman and chief executive. Mack holds both titles at Morgan Stanley.
‘Investors may very well question whether too much power lies with the CEO and whether more independent and accountable directors are warranted,’ RiskMetrics says in a report.”
Posted by on April 11, 2008 5:21 PM
Kristen Grind from Business Journal compiles a list of the groups recommending withholds from WaMu directors.
Her list:
* Change to Win(CtW) Investment Group: The group works with union-sponsored pension funds that hold 4.6 million shares of the company. CtW members also participate in public pension funds that hold an additional 30 million shares in the company.* American Federation of State County and Municipal Employees (AFSCME) Employees Pension Plan: Directly owns about 10,000 shares, and the 1.5 million members of the union own about 3.5 percent of the company through various public retirement systems.
* RiskMetrics/ISS: A proxy advisory service with $35 trillion in assets under management. The advisory firm doesn't break out specific company figures. Typically the firm advises 15 to 20 percent of shareholder vote at large companies like WaMu, according to CtW.
* Glass Lewis: A proxy advisory service that typically advises between 8 and 10 percent of the shareholder vote at large companies like WaMu, according to CtW.
* Proxy Governance: A proxy advisory service that typically advises between 3 to 5 percent of shareholder vote at large companies, according to CtW.
* Egan-Jones Proxy Services: This proxy service has issued a report advising withhold votes against certain members of the board. Its holdings were unavailable.
Posted by on April 11, 2008 3:44 PM
Bloomberg’s Andrew Frye reported that Goldman Sachs has lowered its 12-month price target on WaMu shares and is recommending its clients short sell WaMu shares. Previously, Frye reported, Goldman had forecast a $1 loss/share, but today raised that estimate to $3.30/share after concluding the firm could face $23 billion in mortgage-related losses. In the letter to shareholders, Goldman analyst James Fotheringham advised Goldman clients to sell short, Frye reported.
“Today’s recommendation by Goldman Sachs underscores the severity of risk-management failures at Washington Mutual and the need for immediate action to restore investor confidence,” CtW Executive Director Bill Patterson commented in response to the report. “The removal of directors Pugh and Stevers is a necessary step toward a stronger, more independent board that will improve risk oversight, recoup losses, and survive in today’s challenging economic environment.”
Posted by on April 11, 2008 12:55 PM
Yesterday, Reuters, Bloomberg, and the DowJones newswires posted briefs on the CtW campaign to withhold votes from Ryland directors. In her Reuters piece, Ilaina Jones mentioned that proxy advisor Proxy Governance has also urged shareholders to withhold from Ryland’s compensation committee directors, noting that “Ryland's CEO's average three-year compensation was 407 percent above the median paid to CEOs at peer companies.”
Posted by on April 11, 2008 10:24 AM
Nick Gorski of SNL Financial [subscription] writes an excellent summary of yesterday’s conference call:
"Speaking during a conference call in connection with the Council of Institutional Investors' spring meeting, Patterson said there has been great support among institutional investors at the conference for the effort to remove WaMu directors Mary Pugh and James Stever. 'It's a little early to project any numbers here, but we believe there's a very strong showing' of support, he said. 'The board failure is very pronounced.'
…
“Michael Garland, the director of values strategy at CtW, said the decrease in WaMu's stock value during recent quarters was 'not the inevitable consequence of the cyclical downturn in the housing market.' He blamed it, instead, on the failure of risk management oversight by the board and the finance committee, saying that Pugh, whose company, Pugh Capital, had a business relationship with WaMu until 2006, was not truly independent from the company."'Risk management is too important to delegate to a committee chaired by a conflicted director,'he said.
“Patterson told listeners that a need for an independent chair is conventional wisdom among directors but rare within the financial sector. 'We believe that risk management requires a forceful board who serves as a check on the CEO, that what investors need is a board of directors that will stand up to strong, willful CEOs with a prediction to risk,' Patterson said.”
In other WaMu news, John Goff titles a post on Financial Week, “WaMu lines up capital, but not backing for its directors.”
Posted by on April 10, 2008 3:16 PM
Citing their repeated failure to link pay and performance when designing executive compensation packages, today CtW sent a letter to shareholders of The Ryland Group urging them to withhold votes from Compensation Committee members William Jews, Norman Metcalfe and Charlotte St. Martin at the company’s annual meeting on April 23, 2008.
“Even in an industry known for disproportionate compensation, Ryland’s practices have long stood out,” said CtW Investment Group Executive Director William Patterson. “Investors are disappointed that despite facing a substantial vote of no confidence last year, Directors Jews, Metcalfe and St. Martin continue to misalign executive and shareholder interests. At the upcoming annual meeting, shareholders can send a message that Ryland needs Directors who will restore the link between pay and performance.”
The letter raises concerns about the magnitude of CEO R. Chad Dreir’s annual bonus, long benchmarked at two percent of pre-tax income. It also highlights his excessive supplemental pension benefits, the Company’s provision of tax “gross ups;” and his rich single-trigger severance agreement.
Posted by on April 10, 2008 1:37 PM
On Corporate Governance:
“One of the themes coming out of the engagement with financial institutions that we’ve undertaken is the clear need for an independent chair of the board of directors that represent shareholders. This is conventional wisdom among investors, but a practice that is very rare and almost non-existent in the financial sector…We are strong proponents of an independent chair of a board of directors because we believe that risk management requires a forceful board to serve as a check on the CEO. What investors need is a board of directors that will stand up to strong, willful CEOs with a predilection to risk and will say no or draw the line when they see risk management being compromised. We have seen failures of boards to do that, and we think that having an independent chair of the board is a prerequisite or a predicate to an effective check and balance.”
- Bill Patterson, Executive Director, CtW Investment Group
On Washington Mutual:
“Risk management is too important to delegate to a committee chaired by a conflicted director and that’s why we are recommending that shareholders join with us in withholding support and voting against Mary Pugh at next Tuesday’s director election. And I want to note that our conclusion that Ms. Pugh failed to effectively and independently represent shareholders in her role as finance committee is shared by the three major proxy advisory services as well, RiskMetrics, Glass Lewis and Proxy Governance.”
- Mike Garland, Director of Values Strategy, CtW Investment Group
“We believe that [the Washington Mutual human resources] committee acted contrary to the best interest of shareholders by breaking the link between executive pay and performance, and shielding executive pay from the impact of WaMu subprime loss. We believe that a strong link between pay and performance is a fundamental principle of good governance…We believe it is especially objectionable for a compensation committee, this [Washington Mutual’s] compensation committee, to circumspect an objective and measurable pay standard.”
- Rich Ferlauto, Director of Corporate Governance, AFSCME
“What you’re hearing today on Washington Mutual is a very, very important effort in this area that the AFL-CIO strongly supports, both in itself and as part of a broader effort to see that there is accountability and reform in addressing what the IMF now estimates
to be a more than a trillion dollars in losses in capital markets coming out of the U.S.–centered subprime crisis.”
- Damon Silvers, Associate General Counsel, AFL-CIO
Posted by on April 9, 2008 2:57 PM
Here are the details from our press advisory:
Washington DC – In concurrence with the Council of Institutional Investors Spring Meeting, the CtW Investment Group and AFSCME will host a conference call today at 1:30 p.m. Eastern Time to discuss director accountability for risk oversight failures and the need for governance reform at Washington Mutual and other major U.S. financial service companies. The briefing will highlight specific initiatives for restoring investor confidence at Washington Mutual, the next large U.S. bank scheduled to hold its annual meeting, on Tuesday, April 15. CtW and AFSCME will be joined on the call by shareholder proponents advocating governance reforms at Washington Mutual and several other financial service companies at the epicenter of the mortgage meltdown.
CONFERENCE CALL OUTLINING DIRECTOR ACCOUNTABILITY AND GOVERNANCE REFORM INITIATIVES AT WAMU AND OTHER BANKS
DATE: Wednesday, April 9, 2008
TIME: 1:30 p.m. ET
HOSTS:
The CtW Investment Group
American Federation of State County and Municipal Employees
If you’re a journalist or a finance blogger and you missed the call but would like to listen to a recording, please email anna [dot] mumford [at] changetowin [dot] org.
Posted by on April 9, 2008 10:15 AM
The CtW director accountability campaign was featured prominently in Landon Thomas’ summary of Morgan Stanley AGM in the Business section of the Times today.
“One of the main CtW proposals was for Morgan Stanley to appoint an independent chairman who, in theory, would carry a greater degree of independence and thus provide a counterweight to Mr. Mack’s forceful personality. And while Institutional Shareholder Services, the influential proxy advisory firm, advised investors to vote for the Morgan Stanley slate, it also concluded that Morgan Stanley would be better served with an independent chairman.“In addressing the issue, Mr. Mack was adamant in defending the directors on his board, most of whom have come on since he returned to Morgan Stanley in 2005.
“‘This board runs this company, and I would take exception to CtW saying anything negative about this board,’ he said, his voice rising slightly. ‘I report to the board and shareholders.’”
Posted by on April 9, 2008 9:54 AM
Both our Executive Director Bill Patterson and our Research Director Rich Clayton were interviewed this morning in advance of the Morgan Stanley annual meeting.
Check out Patterson on Bloomberg TV [Click the link under "Related Video and Graphics”] and Clayton on CNBC.
Posted by on April 8, 2008 3:31 PM
David Enrich of the WSJ reported this morning that the chairman of Citigroup’s audit and risk committee, Michael Armstrong, is expected to step down “amid a push by the AFL-CIO and other institutional investors to oust him from Citigroup's board.”
“The mortgage rout has already cost several chief executives their jobs. Now some corporate directors serving on the audit committees of financial firms are in the crosshairs of investors,” Enrich writes.
Enrich noted that other financial service companies are feeling pressure from shareholders as well. “The campaign against Mr. Armstrong could energize similar efforts, while forcing directors and companies to reassess how effectively audit committees are doing their job,” Enrich writes.
Citing a board-restructuring plan rumored to be under consideration at Merrill Lynch, Enrich notes that some banks are already taking steps to “pacify investors.”
Posted by on April 8, 2008 12:42 PM
On Dealscape, Michael Rudnick reported that the news of WaMu’s pending recapitalization “fueled CtW Investment Group's fire against the company's board,” and that CtW “looks to be in good company, as proxy advisory firm Proxy Governance has jumped in on the fight to add some new blood to the ailing home lender's board, recommending Monday that its clients withhold votes for Mary Pugh, WaMu's finance committee chair, and its human resources committee chair James Stever at the company's April 15 annual meeting.”
Kevin Dobbs of American Banker [subscription] wrote a lengthy piece discussing the mounting concerns of WaMu shareholders in advance of the company’s annual meeting. Dobbs writes, “…some investors who have suffered through Wamu's descent into the subprime morass…are looking for the company to shake up its board.”
One of these shareholders Dobbs cites is Vincent Au:
“‘It would be very productive to have new, independent voices on the board,’ Vincent Au, a stockholder and the president of Avalon Partners Inc., a New York investment firm that represents Wamu shareholders, said in an interview last week. Mr. Au, who would not say how many shareholders his firm represents, said he supports a plan to oust two current directors in favor of yet-to-be-named nominees who do not have close ties to Wamu.”
Noting that TPG is also the owner of Harrah’s casinos, today on the WSJ’s Deal Journal blog Heidi Moore drew some interesting parallels between banks and gambling, quoting the CtW’s criticism of WaMu’s board for it’s failure to properly oversee mortgage related risk.
The Associated Press, Bloomberg News, and TheStreet also mentioned the CtW director accountability initiative in their reports on WaMu’s cash injection.
Posted by on April 7, 2008 6:30 PM
CtW Investment Group welcomed today’s recommendation by Proxy Governance that its clients withhold their votes from nominees Mary E. Pugh, chair of the finance committee and James H. Stever, chair of the human resources committee, as well as other directors at Washington Mutual’s annual meeting of stockholders on April 15, 2008.
In recommending against Pugh, Proxy Governance wrote in its April 7 report, “we believe that shareholders should not have to wonder if the chairman of the committee responsible for risk management oversight is too indebted to current management to speak her mind on an issue. If the Finance Committee is to continue in its current risk management role, we believe that Pugh should not serve as its chair.”
Proxy Governance further urged shareholders to “communicate their dissatisfaction” with the human resources committee’s “willingness to decouple pay and performance” by voting against all current members of the committee.
Proxy Governance joins proxy advisors RisMetrics/ISS, Glass Lewis and Egan Jones in calling for withholds from Washington Mutual directors. Citing concerns over risk management and compensation, last Friday proxy advisor RiskMetrics/ISS recommended that shareholders withhold votes from all members of the finance and human resources committees. On Thursday, Glass Lewis called for withholds from Pugh, Stever and other members of the human resources committee, and proxy advisor Egan Jones recommended that shareholders withhold from Stever.
Posted by on April 7, 2008 1:38 PM
Today’s report in the Wall Street Journal that Washington Mutual solicited $5 billion from private equity firm TPG demonstrates the severity of the company's risk management failures and underscores the need for new, independent leadership on its board of directors, according to the CtW Investment Group.
"That Washington Mutual finds itself requiring such a large capital investment only goes to show that incumbent directors have failed to properly oversee risk management," said Bill Patterson, Executive Director of the CtW Investment Group. "This possible infusion - which is equal to nearly 20% of shareholders' equity at the end of 2007 - should be a clear signal that shareholders need new, independent leadership on this board to protect their investment going forward."
In a March 27 letter to Washington Mutual shareholders, CtW argued that as chairs of the committees charged with risk management oversight and compensation, respectively, nominees Mary E. Pugh and James H. Stever bear responsibility for Washington Mutual’s failure to recognize and act in a timely manner on the risks to shareholder value presented by the housing bubble, and for attempting to insulate executive bonuses from the consequences of this risk management failure.
Posted by on April 7, 2008 1:10 PM
In today’s Wall Street Journal, Jed Horowitz reports that pressure is mounting on Morgan Stanley’s board as two more public pension funds joined CalSTRS in opposing the reelection of Morgan Stanley directors.
Horowitz writes:
“The State Universities Retirement System of Illinois, which owns about 240,000 Morgan Stanley shares valued at around $11.4 million, is opposing all 11 directors nominated for re-election. The State of Connecticut Retirement Plans & Trust Funds, which own 683,438 Morgan Stanley shares valued at $33.4 million, said Friday it has withheld votes for Messrs. Mack, Kidder and Davies. Those three are opposed by Change to Win Investment Group, a group that advises union pension funds on their votes.”
Horowitz also notes:
“Several proxy-advisory firms have recommended that pension funds hold Mr. Mack and other directors on the New York firm's audit committee responsible for allowing Mr. Mack to increase the company's risk appetite since he took the top posts in 2005.”
Posted by on April 7, 2008 10:01 AM
The bank proxy season kicks off with the Morgan Stanley’s AGM tomorrow. CtW is urging Morgan Stanley shareholders to withhold from three Morgan Stanley directors, and last Friday CalSTRS announced it has come to a similar conclusion.
Coming up on April 15 is Washington Mutual’s annual meeting. At the end of March, CtW sent a letter to WaMu shareholders outlining our case for removing directors Mary Pugh and James Stever based on their failure to properly oversee risk management and their attempt to insulate executive bonuses from the consequences. So far, independent proxy advisors ISS and Glass Lewis have joined our call for the removal of Pugh and Stever – and we’ll update you as soon as we learn how some of the public pensions funds are voting.
These upcoming meetings will provide shareholders the opportunity to hold bank boards accountable for their failures to manage mortgage related risk that destroyed billions in shareholder value, destabilized global capital markets, and precipitated a credit crunch that has thrown the U.S. economy into recession.
Posted by on April 7, 2008 8:32 AM
We’re here to chronicle the events of the 2008 proxy season as well as keep you updated on our subprime director accountability initiative.
Here's a little background:
The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win. Our affiliates’ six million members participate in public and Taft-Hartley pension funds with approximately $1.5 trillion in assets. Our goal is to enhance long-term shareholder value through active ownership, and this proxy season we’re focusing on the six U.S. banks that have suffered the largest mortgage-related write-downs and share price declines. We’re urging shareholders to vote against the reelection of directors who fail to offer a satisfactory explanation as to what they did to ensure that management was properly controlling mortgage-related exposure.
So stay tuned – we’ll keep you updated on the progress of our campaign and the latest news on shareholder activism and the mortgage meltdown.
- CtW Investment Group
If you have any questions or comments about our blog, you can email us at anna [dot] mumford [at] ctwinvestmentgroup [dot] com.
Posted by on April 4, 2008 4:08 PM
