Shareholder Spring Dismissed as a Myth | Chief Investment Officer

(November 20, 2012) – The wave of dissent against company remuneration packages in the early part of this year may have been no more than a blip and failed to ignite a push towards corporate governance among investors in the United Kingdom a study has revealed.

Non-profit organisation FairPensions found that the rumblings that some classed as an uprising against poor corporate governance in the spring of 2012 was greatly overstated. The organisation surveyed some of the largest asset managers and institutional investors in the UK and said its findings were “disappointing”.

“It now seems clear that isolated rebellions did not translate into higher levels of dissent across the board. Analysis by PIRC of a sample of 300 AGM results for FTSE All-Share companies in the first two quarters of 2012 shows that the average vote against remuneration reports was 7.64%, compared to 6.4% in 2011,” the FairPensions report said. “The notion that 2012 saw a significant and widespread jump in shareholder dissent on pay does appear to be a myth.”

A series of CEOs stepped down after remuneration packages shareholders felt were excessive were voted down. Drugs giant AstraZeneca and newspaper group Trinity Mirror lost their leaders, while others were forced to give up large pay and bonus arrangements.

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However, the report said there was no pattern in votes against remuneration packages in the early part of the year – it even suggested there could be a correlation between how well a company’s share price was doing and the likelihood of a vote against relatively generous remuneration packages.

“Whilst remuneration reports clearly need to be considered on a company-by-company basis, the waving through of reports with components widely considered as bad practice needs to be explained,” the report said.

Nor was there consistency from asset managers, who are usually responsible for filing the votes on behalf of their investor clients, the report said. These fund managers showed wide variability between what they would vote for and against, and as a community, there appeared to be little agreement on what constituted poor governance practices.

“There also appears to be significant variability in willingness to challenge management, with some large UK asset managers appearing reluctant to vote against remuneration reports even at companies which suffered large revolts,” the report said.

This week shareholders in mining giants Glencore and Xstrata voted in favour of a merger between the two companies, but did not agree to a “golden handcuffs” remuneration package. The director responsible for the proposal resigned soon after the result of the vote was announced.

Conversely, the largest owner of listed shares in the world, the Norway Pension Fund-Global announced this week that it was going to be a more active in lobbying for better corporate governance on behalf of smaller investors.

For the full FairPensions report click here.

Chevron Corp., one of the world's biggest oil companies, has filed an ethics complaint against New York State Comptroller Thomas DiNapoli, who says the allegations are without merit.

(November 20, 2012) — One of the world’s biggest oil companies is accusing New York State Comptroller Thomas DiNapoli of using his political position to urge donations in connection with a massive international lawsuit. Yet DiNapoli has countered by denying the allegation, calling it an attempt of intimidation.

The complaint, filed by Chevron Corp. before the New York State Joint Commission on Public Ethics, accuses DiNapoli, who oversees the roughly $150 billion New York State Common Retirement Fund, of trading official actions for campaign donations in connection with a large international lawsuit. It seeks an investigation of DiNapoli as well as current and past members of his staff for multiple violations of New York Public Officers Law.

Chevron’s complaint relates to ongoing litigation in Ecuador and demonstrates how DiNapoli, while overseeing the New York State Common Retirement Fund that owns more than $800 million of Chevron stock according to SEC filings, allegedly breached his ethical and fiduciary duties. Under New York Public Officers Law, public officials are prohibited from having “any interest, financial or otherwise…which is in substantial conflict with the proper discharge of his duties in the public interest.” A statement by Chevron explains that Comptroller DiNapoli used his office to support the Ecuadorian plaintiffs’ lawyers’ scheme to pressure the oil giant into settling the lawsuit in exchange for benefits received from the plaintiffs’ representatives.

“The Comptroller’s continued advocacy has come despite repeated findings by US federal courts that the Ecuador litigation is tainted by fraud,” said Hewitt Pate, Chevron vice president and general counsel, in a statement. “Mr. DiNapoli’s actions serve only his political patrons, not the citizens of the State of New York or the beneficiaries of the Common Retirement Fund. This type of quid pro quo behavior is an apparent breach of ethical and legal responsibilities that warrants investigation.”

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DiNapoli has denied wrongdoing. “This is a baseless attempt by big oil to intimidate me and it won’t work. The allegations are without merit,” he said in a statement.

According to the comptroller, since 2004, the New York State Common Retirement Fund, along with dozens of leading investors worldwide, has called on Chevron to settle its nearly two-decade-long legal battle for polluting the Amazon. “This effort is about protecting shareholder value and fulfilling my fiduciary responsibility to the New York State Common Retirement Fund,” DiNapoli said. He added: “Instead of owning up to its corporate responsibility, time and again Chevron has denied its responsibility, distorted the facts and ignored the ruling of a court of law.”

Comptroller DiNapoli took office in 2007 after his predecessor, Alan Hevesi, departed under allegations of misconduct, including a pay-for-play scandal that resulted in a prison sentence.

Read Chevron’s full complaint here.