Investors rarely reject management’s views on such matters, especially at a time when a company’s stock is soaring. Yet despite the 250% increase in Netflix‘s price during the past 12 months, shareholders today resoundingly supported several changes to democratize the way the company is run. A motion to repeal the classified board — where the seven directors serve multiyear terms, and only a few are up for re-election each year — won with 88.4% support. More than 80% said that uncontested board candidates should only be elected if they win a majority of the vote. A similar number want shareholder motions to pass with a majority vote — ending requirements for a supermajority. And 73% want Netflix’s chairman to be an independent director, which would mean that Reed Hastings couldn’t be both CEO and chairman. READ MORE »
Corporate governance practices at Viacom have been so bad for so long that I was tempted yesterday to just laugh off the announcement — made right after the annual shareholder meeting — that it has appointed Inside Edition anchor Deborah Norville to its 15-member board. Sumner Redstone owns about 79% of the voting shares. What he says goes. So what difference does it make if the board includes someone who has never demonstrated an interest in corporate finance or affairs? Norville has ”more than 30 years of media and television experience and brings a unique perspective to our board that enhances the diversity,” a Viacom spokesman says.
Sorry, but that’s not good enough. Viacom is a $30.8B global company that employs nearly 10,000 people. And Redstone controls 79% — not 100%. He gladly takes other people’s money to run the enterprise. That means he has both a legal and moral responsibility to protect them as well as himself. It should lead him to bend over backwards to ensure that the board represents shareholders, and does so effectively. It needs people who know what’s on investors’ minds, who are well versed in the issues being discussed, and feel independent and fearless enough to stand up to Redstone when they think he’s wrong.
Under more normal circumstances, the Orpheum Theater in Phoenix would briefly replace Disneyland tomorrow as Disney‘s “happiest place on earth.” The company’s stock is trading around an all time high as shareholders prepare to convene there for their annual meeting. But attendees instead are girding for a fight over resolutions that could shape the way Disney’s run, especially after Bob Iger steps down in June 2016. Many shareholders support a movement sweeping corporate America to democratize governance policies, giving the people who ostensibly own a company more flexibility to check the power of CEOs and directors. Disney infuriated them in 2011 by agreeing to make Iger chairman as well as CEO, which critics say puts him in charge of the team that’s supposed to judge his performance. And the company further enraged shareholder rights advocates recently when it gave Iger a 20.3% raise with a package for fiscal 2012 worth $40M — even though 43% of Disney shareholders opposed management in the federally mandated say-on-pay advisory vote at last year’s annual meeting.
That set the stage for tomorrow: California teachers’ fund CalPERS, and proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis, are among the groups asking shareholders to oppose Disney in the say-on-pay vote. They also support two shareholder resolutions that Disney opposes. One would enable some stock owners to nominate candidates for the board — an idea that’ll be raised at several companies this year. The second urges the board to amend the company’s governance guidelines to prevent a CEO after Iger from also serving as chairman, except under brief and unusual circumstances.
UPDATE, 2:38 PM: Add the influential ISS Proxy Advisory Services to the shareholder guidance firms that support the proposal favoring an independent chairman at News Corp. “Based on such issues as the phone hacking allegations and the board’s response, as well as other problematic board actions over recent years, including unwarranted adjustments made under the company’s compensation program in the most recent fiscal year, it appears that shareholders would benefit from increased independent leadership of the board,” it says in a new report. ISS adds that the lead director lacks the power “to counterbalance the combined CEO/chairman role.” Still, ISS recommends a vote for all the board candidates — a change from last year when it opposed all nominees except for James Breyer and Joel Klein.
PREVIOUS, 1:25 PM: The odds are slim that a resolution by Christian Brothers Investment Services that would require the chairman to be independent of management will succeed at the company’s shareholders’ meeting in Los Angeles on October 16: Murdoch and his family control about 40% of the voting shares and like things the way they are. Still, several shareholders hope to make this a big issue — and it’s won the support of advisory firms Hermes Equity Ownership Services and Glass Lewis. The proposal says that following disclosures of widespread hacking and bribery at News Corp’s UK tabloids, an independent chair would enable the company to “create greater independence and objectivity on the board, begin to rebuild the public confidence and trust that is critical to a major news organization, and assure shareholders that governance failures are being addressed.” Glass Lewis agrees. It says that “vesting a single person with both executive and board leadership concentrates too much oversight in a single person and inhibits the independent oversight intended to be provided by the board on behalf of shareholders.” The firm takes a dim view of News Corp’s governance. It gives the company a “D” grade in linking executive pay to performance and is urging shareholders to oppose five board candidates: Natalie Bancroft, David DeVoe, James Murdoch, Lachlan Murdoch, and Arthur Suskind.
Corporate governance geeks will be interested in this footnote to the shareholder vote for the Disney board at Tuesday’s annual meeting: The results, just released, suggest that advisory firm Institutional Shareholder Services had more sway with the company’s …
About 56.6% of Disney‘s shares were cast in favor of its controversial executive compensation plan while 42.8% opposed — down from last year when 76.8% supported and 22.7% opposed – according to the preliminary results announced today at the annual meeting in Kansas City. Shareholders also elected the company’s slate of directors; numbers weren’t broken out for each member. Executive pay became a big issue this year after corporate governance analysts Institutional Shareholder Services (ISS) and Glass Lewis & Co urged investors to oppose the package in an advisory vote. Glass Lewis gave Disney a “D” grade on its pay-for-performance analysis — the fourth consecutive year Disney got the grade. “Overall, the Company paid more than its peers, but performed moderately worse than its peers,” the firm said in a recent report. It urged a “no” vote “to signal dissatisfaction with the Company’s executive compensation program and to compel the board and the compensation committee to take corrective action.” ISS also opposed the compensation arrangement, in part to protest the company’s decision to make CEO Bob Iger the company’s chairman as well with the departure of John Pepper. Disney said that the company’s stock has performed well, and that Iger’s role as CEO and chairman will help him to mentor his successor.
The campaign to block CEO Bob Iger from also becoming Disney‘s chairman has gained a new supporter. The Nutmeg state’s treasurer, Denise Nappier, says she will use the votes from the 642,000 Disney shares in Connecticut’s retirement funds to oppose the board members on the Nominating And Governance Committee who drove the effort to give Iger the top two jobs this year, when John Pepper steps down as chairman. Nappier’s announcement follows a similar recomendation last week from investor advisory firm Institutional Shareholder Services. “It is quite disturbing that Disney has chosen to embrace a regressive policy that could impair the board’s role to oversee executive management on behalf of shareholders,” Nappier said in a statement cited by Bloomberg. Nappier has also opposed
UPDATE, 2:30 PM: The Viacom chairman wasn’t as busy as he thought following the wave of speculation that his earlier decision to skip the shareholder gathering indicated that he was ill — or just indifferent to other investors: “Mr. Redstone very much wanted to attend the Viacom annual meeting,” company spokesman Carl Folta says. “He was able to change his commitment and will participate in person at the meeting.”
PREVIOUS, 1:46 PM: “Sumner owns a majority of the outstanding shares and has never pretended to be anything other than a benevolent dictator” corporate governance expert Robert A.G. Monks says regarding Redstone’s decision to skip Viacom’s annual shareholder meeting in New York on Thursday. The chairman will deliver a video address, but won’t attend due to an unspecified but “unavoidable conflict,” the company says. That fueled some speculation that Redstone, 88, may be sick. “People have been on the watch for a while; it’s not a good sign,” says one veteran Viacom observer. There’s no health problem, the company told Bloomberg: Redstone attended the Oscar awards ceremony and plans to show up later this month when he’ll be presented with a star on Hollywood’s Walk Of Fame. But that makes Redstone’s decision to skip the annual meeting — an event he called, on a date he presumably set — all the more perplexing to governance experts.