Corp v. Comptroller: Dodging the Question
What's the easiest way to make sure you don't lose a contest? Prevent it from happening, of course! According to a new report from the City Comptroller, that's exactly what several corporations did in 2006 when New York City's pension funds asked for changes in financial or social policies: The firms simply blocked the question from being submitted to shareholders for votes, and the federal Securities and Exchange Commission rubber stamped the corporate moves.
Comptroller Bill Thompson is the day-to-day custodian of the $87 billion invested by New York City's five employee pension funds (covering fire, police, teachers, board of ed, and other employees). As a major shareholder in hundreds of companies, the city often tries to change company policies, like trying to get them to shun Iran or comply with the MacBride principles that prohibit religious discrimination in Northern Ireland. It works like this: Thompson's office submits a proposal, and the company either agrees to it or puts it to its shareholders for a vote.
When the city pension funds went to Rite Aid with a proposal to require that shareholders approve the selection of independent auditors, Rite Aid contended that the issue was part of its "ordinary business operations," which under SEC rules are off-limits to shareholder votes. SEC staff agreed with Rite Aid. When New York City appealed the ruling, the staff refused to submit the issue to the Commission itself, and the proposal died.
New York Islanders Playoff Round 2 Game A (If Necessary)
TicketsTue., May. 3, 7:00pm
Westchester Knicks Playoffs - Round 2 Game 1
TicketsTue., May. 3, 8:00pm
New York Islanders Playoff Round 2 Game D (If Necessary)
TicketsWed., May. 4, 12:00am
New York Islanders Playoff Round 2 Game B (If Necessary)
TicketsFri., May. 6, 7:00pm
Rite Aid wasn't alone. When the city pension funds put forth proposals requiring that firms "disclose social, environmental and economic performance by issuing an annual sustainability report," Honeywell International and Raytheon prevented vote. Sempra Energy stifled the yeas and nays on a proposal to mandate a "report on efforts to reduce carbon dioxide and other emissions from existing and proposed power plants. Newmont Mining's shareholders never got a chance to decide if they wanted to "review environmental and social impacts of operations in Indonesia Companies." Clear Channel tried to block a vote on whether to "establish an Independent Compensation Committee," but the SEC wouldn't let it. The proposal ended up receiving 42 percent of shareholder votes.
These refusals were the exception to the rule: The vast majority of Thompson's proposals went to a vote, and others were accepted by the companies outright. Amid the successes: Unumprovident Corp. and Newell Rubbermaid agreed to reform how shareholder proposals are enacted, shareholders at several companies voted to adopt proposals reforming how directors are elected, H.J Heinz and National Semiconductor said they would issue an annual sustainability report, and a host of firms said they'd bar discrimination based on sexual orientation.
But in a few cases, even when corporations allowed votes, other shareholders were not feeling quite as socially conscious as the city's pension funds. Less than 6 percent of Coca-Cola shares backed a call for a committee to oversee an inquiry into "charges of collusion in anti-union violence that have been made against officials of the company's bottling plants in Colombia." Only 13 percent of the shares at Chevron Texaco voted to disclose political contributions.
And when the Fire pension fund asked Dow Chemical to "report to the shareholders any new initiatives instituted by management to address specific health, environmental and social concerns of survivors in Bophal, India," only 6.7 percent of shares backed the measure.
Get the This Week's Top Stories Newsletter
Every week we collect the latest news, music and arts stories — along with film and food reviews and the best things to do this week — so that you’ll never miss Village Voice's biggest stories.