Substantial 2013 Results Already Produced by SRP and SRP-Represented Investors

Editor’s Note: Lucian Bebchuk is the Director of the Shareholder Rights Project (SRP), Scott Hirst is the SRP’s Associate Director, and June Rhee is the SRP’s Counsel. The SRP, a clinical program operating at Harvard Law School, works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University. The work of the SRP has been discussed in other posts on the Forum available here.

In its news alert released yesterday, the Shareholder Rights Project (SRP), working on behalf of eight SRP-represented investors, announced that proposals submitted for 2013 meetings have already had significant impact. As discussed below, major results obtained so far include the following:

  • Following active engagement, 46 S&P 500 and Fortune 500 companies that received shareholder proposals for 2013 annual meetings have already agreed to move towards annual elections.
  • These 46 companies represent more than 60% of the companies receiving shareholder proposals from SRP-represented investors for the 2013 proxy season.
  • Together with the 2012 work of the SRP, 91 companies — about three-quarters of the S&P 500 and Fortune 500 companies that received proposals in 2012, 2013 or both — have agreed to move towards annual elections. The aggregate market capitalization of these 91 companies exceeded one trillion dollars as of March 1, 2013.

As described in the SRP’s November 2012 news alert, the SRP submitted shareholder declassification proposals on behalf of SRP-represented investors to 74 S&P 500 and Fortune 500 companies with classified boards for a vote at their 2013 annual meetings. Following active engagement with companies receiving proposals, 42 companies have entered into agreements to bring management proposals to declassify their boards for shareholder approval (a list of those companies that have already publicly disclosed the agreed-upon management proposals is available here). Furthermore, 4 other companies have declassified by amending their bylaws (where companies’ classified board structures are set out in their bylaws, declassification may occur without a shareholder vote). The boards of these 46 companies should be commended for their responsiveness to shareholder concerns.

In addition to the 42 companies that will put forward management proposals to declassify pursuant to 2013 agreements with SRP-represented investors, 11 companies will put forward management proposals pursuant to agreements entered into following the submission of 2012 proposals by SRP-represented investors. Full details about the management proposals that will be brought to a vote pursuant to 2012 agreements with companies are available in the SRP’s 2012 annual report.

The agreements resulting from 2013 proposals, combined with the large number of 2012 declassifications of S&P 500 companies that resulted from engagement with the SRP and SRP-represented investors (described in the 2012 annual report), are expected to bring about a major change in the governance landscape of large publicly traded firms. The SRP expects that, by the end of 2013, the work of the SRP and SRP-represented investors will have contributed to movements toward board declassification by a majority of the S&P 500 companies that had classified boards at the beginning of 2012.

The eight institutional investors on behalf of which the SRP is working are the Illinois State Board of Investment (ISBI), the Los Angeles County Employees Retirement Association (LACERA), the Nathan Cummings Foundation (NCF), the North Carolina Department of State Treasurer (NCDST), the Ohio Public Employees Retirement System (OPERS), the Massachusetts Pension Reserves Investment Management Board (PRIM), the Florida State Board of Administration (SBA) and the School Employees Retirement System of Ohio (SERS). The SRP provides SRP-represented investors with a wide range of services in connection with the submission of shareholder proposals, including submitting proposals on behalf of such investors, and assisting such investors in connection with designing proposals, selecting companies for proposal submission, engaging with companies, negotiating and executing agreements with companies to bring management declassification proposals, and presenting proposals at annual meetings.

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One Comment

  1. Posted Thursday, March 14, 2013 at 11:26 am | Permalink

    Maybe the SRP should look into filing a declassification proposal at Waste Connections (WCN) next year. I filed such a proposal for this year. Instead of requesting a no-action letter from the SEC, which I doubt they could have gotten, they took their case to the same US District court in Houston that has become well known as unfriendly to shareowners. Among the many allegations, my wife’s signature can’t be hers because it looks like another name (a slight swirl is interpreted as an additional letter).

    Of course, as an average retail shareowner, I can’t afford to go up against a $3-4 billion company, so I submitted a covenant not to sue if they leave my proposal off the proxy. I’m asking for a dismissal, based on no cause of action. The suit is proceeding because the SEC has not agreed not to sue.

    I’d love to see the SRP set up a legal defense fund for cases that bypass the SEC process and where courts give companies, not shareowners, the benefit of any doubt.

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