A December 8th report from FactSet Insight highlights New York City Comptroller Scott Stringer’s Boardroom Accountability Project 2015. The project includes submitting a shareholder proposal to 75 companies that have large institutional ownership requesting the adoption of a bylaw allowing shareholders who have owned at least 3% of a firm’s stock for three years or more to have automatic proxy access to nominate directors to the board of directors.
FactSet Account Executive Anthony Garcia notes that given only 60 firms in the S&P 500 have classified boards (staggered terms) as of December 31, 2013 (down from 300 in 2000), the success of the project in creating shareholder proxy access raises the possibility of some companies facing completely new slates of directors over the next few years.
With the S&P 500 falling a double-digit percentage in the first half, most equity hedge fund managers struggled to keep their heads above water. The performance of the equity hedge fund sector stands in stark contrast to macro hedge funds, which are enjoying one of the best runs of good performance since the financial crisis. Read More
CalPERS and others joining Boardroom Accountability Project 2015
The California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the U.S. supports the Boardroom Accountability Project 2015, and it’s received positive feedback from public pension funds in Connecticut, Illinois, and North Carolina. Among the 75 companies on the project’s list, eight have at least one FactSet SharkWatch 50 activist that currently holds a 3% ownership stake and another 16 firms have a FactSet SharkWatch 50 activist holding 1% to 3% of outstanding shares outstanding.
Garcia also notes that a number of firms have recently adopted bylaws after feeling pressure from institutional shareholders. Chesapeake Energy Corporation (NYSE:CHK), which had also previously been the target of a CalPERS proposal, Hewlett-Packard Company (NYSE:HPQ), Verizon Communications Inc. (NYSE:VZ), and The Western Union Company (NYSE:WU) all recently amended their respective bylaws to allow investors to submit nominations to the board at the same 3% for the three years level as suggested by the Boardroom Accountability Project. The proposals were submitted by management in all cases, and received an average favorable vote of 95% of votes cast. This high a vote in favor makes it clear the investment community is strongly in favor of increased proxy access for shareholders.
Moreover, firms are more likely to agree to proxy access at the 3% for three years level given less attractive alternatives, such as the proposal by the public pension fund of Norway, Norges, to Western Union for proxy access at the 1% ownership level for one year. Of note, over the last few years, Norges has submitted five proxy access proposals at the 1% for one year level, and received an average of 30% favorable votes in the cases it came to a shareholder vote.
NYC Comptroller Stringer is an activist investor
The New York City Retirement Systems handles investments for the New York City Employees’ Retirement System, New York City Fire Department Pension Fund, New York City Pension Funds, New York City Police Department Pension Fund and New York City Teachers’ Retirement System. NYCRS is managed by the director of the Office of the Comptroller of New York City. NYCRS (more than $158 billion in assets under management) has submitted 25 shareholder proposals that made it to a shareholder vote since Scott Stringer took office. Three of the proposals related to proxy access, targeting Abercrombie & Fitch Co., Big Lots, Inc., and Kilory Realty Corp., and two of the three were approved.