Attacking Proxy Advisors

Since the passage of Dodd-Frank, in the summer of 2010, there has been a constant drumbeat from representatives of the corporate community, particularly the Business Roundtable and the U.S. Chamber of Commerce, regarding the need for an increased level of regulatory oversight focused on proxy advisory firms.

One recent example was Tom Quaadman of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness (2010): “The center “believes that proxy advisers may fail to reliably represent the investors they purport to serve” by, among other reasons, contending they have an apparent “decision and policy development process that is arbitrary and capricious” and “economic incentives (that) drive one-size-fits all policy which will not produce better informed investors or managed companies.” In that same year, The Business Roundtable issued a press release (12/11/10): “In any event it is critical that the SEC update its rules to promote greater efficiency and transparency in the proxy voting system and enhance the accuracy and integrity of the shareholder vote, including regulation of proxy advisory firms.” (emphasis is mine)

At this point, we need to pause for a reality check: Are the Business Roundtable and the U.S. Chamber of Commerce really calling for new federal regulation? Is the cobra asking for a subsidy for mongoose breeders? It must be a typo!

What do Proxy Advisors Do?

I must disclose that I was the founder of ISS, the “monopoly” proxy firm, which is the subject of all this brouhaha. I don’t know whether to laugh or to cry when I reflect that it took two years to get a client whom I had not gone to school with and five years to break even. My son disposed of our entire interest about four years ago, so I can approach the subject with economic independence. I do retain passionate intellectual convictions about the utility and integrity of “my baby”. Proxy advisory firms – ISS, Glass Lewis – have the distinction of being the only category of professional service providers, including lawyers and accountants, not to have been suborned by corporate management. There has been not a single allegation of proxy advisory firms either accepting bribes or of acting in bad faith. So there is no back ground of abuse.

Their “crime” is that they represent a threat to the autocracy of the CEO and incumbent boards through advice to shareholders in voting on the particular matters, approved by the SEC, on the proxy for the Annual Meeting. There is no compulsion – legal or implicit – on shareholders to employ the services of proxy advisors firms. This is a business like others; a party purchases a service if it is valuable to him and for no other reason. If he finds defects in the product, he will doubtless not buy it again.

Consider carefully– what is the scope of activity of proxy advisory firms: They give advice as to issues presented on company proxy statements. They have no authority to raise issues on their own; they can only advise on issues raised by others. Proxy advisors have no power to vote, except as expressly authorized by the legal owners.

· Question: What does ISS do? Answer: It provides information.
· Question: To whom does it sell this information? Answer: A cadre of largely sophisticated investors.
· Question: Is anybody obligated to buy it – in the sense that Moody and S&P’s customers are “mandated” Answer: No.

Follow the Money

So what is the justification for governmental involvement? ISS has no influence over what subjects shareholders present; ISS has no influence on the varying policies of the SEC in interpreting 14(a)(8) of the Exchange Act which is the final factor in determining precisely what issues will be included on the company’s proxy statement. ISS certainly is not “soliciting” proxies in the common sense meaning of those words; they have no stake, no interest, no contingency in how their customer uses the information they provide.

Does it make sense for the SEC to extend its authority in this direction? In its Concept Release (7/22/10) the Commission becomingly summarizes:

“[B]ecause of the breadth of the definition of ‘solicitation’, proxy advisory firms may be subject to our proxy rules because they provide recommendations that are reasonably calculated to result in the procurement, withholding or revocation of a proxy.”

What’s the problem? The real problem is the failure of the customer of the proxy advisory service to fulfill its fiduciary obligations. The ultimate responsibility to take all steps necessary to preserve the value of trust assets (including the proxy) rests on the legal owner. Even in cases where the trustee-owner hires expert consultants, ultimate responsibility lies at his door to make final determination as to the appropriateness of the advice he receives.

Why then is there this persistent effort to hobble the proxy advisors? Why not regulate those parties legally obligated to vote? Instead, the focus is on undermining the advisors: The Shareholder Communications Coalition (a coalition of industry groups including the BRT, National Investor Relations Institute and others) wrote to the Commission: “The SEC and the Labor Department should consider establishing a more robust due diligence process of institutional investors, so that the proxy voting enjoys a more important role in the investment process and within the fiduciary responsibilities of these investors.”

Hugh Wheelan of Responsible Investor wrote, “In a sign of the firepower being ranged in the US against the proxy firms, a group called The Shareholder Communications Coalition, which represents Business Roundtable, an A-Z of US corporate chief executives with nearly $6 trillion in annual revenues, said SEC rules giving shareholders a voting [sic] on executive pay had made it “even more imperative” that the SEC move to regulate.”

The Coalition presumes SEC involvement and suggests a regulatory precedent:
“As the SEC develops a regulatory framework for proxy advisory firms, one possible avenue for guidance is the current evolving regulation of credit rating agencies, also called NRSROs. A review of the SEC and staff actions with regard to NRSROs during the past years shows that there are numerous and significant analogies with regard to problematic practices and regulatory improvements that should be considered for proxy advisory services”.

Has anyone thought about the SEC’s backlog in regulations mandated by Dodd Frank; has any one thought about priorities; has anyone evaluated the relative urgency of this among other proposals? It’s all about money. Since Watergate, our national culture has relentlessly confirmed that many questions can be answered most conclusively by “following the money”.

Here is the background
ISS recommended a no vote at approximately 300 companies, or about 12.5 percent of the Russell 3000 companies in the sampled universe. Although harder to track, Glass Lewis seems to have recommended a negative vote at a somewhat higher percentage of companies, reportedly as high as 17 percent. Importantly, the difference between receiving a favorable recommendation from ISS and an unfavorable one, on average, was a swing of approximately 25 percent of all votes cast. Glass Lewis’ recommendations seemed to produce about an additional 5 percent swing in votes cast.

A second relevant key statistic is that companies receiving a negative proxy advisory recommendation from ISS averaged less than a 70 percent positive shareholder vote, compared to those receiving positive proxy advisory recommendations, which routinely scored 90 percent or higher positive shareholder votes.

The importance of the below 70 percent average positive vote where ISS has issued a negative say-on-pay recommendation becomes startlingly clear when set against ISS’ almost certain voting policies for 2012. As is its custom, ISS has polled the jury of corporate governance opinion and is on the verge of concluding that a less than 70 percent “yes” vote is sufficiently indicative of investors’ lack of confidence in a company’s pay practices to require corrective action by the company. Failing corrective action, the ISS policy in 2012 would be to recommend a withhold vote for directors on the Board’s compensation committee and/or an automatic recommendation to vote “no” at the next annual say-on-pay vote.

And so, our tale comes to a predictable pause – the problem is that ISS has acquired the appearance of power with respect to top executives’ pay. Protecting the absolute power of CEOs to set their own pay seems to be what the coalition is all about.

Effective Consumer Action Means Collective Action

I read an interesting article in Yes Magazine recently (Watch Us Move Our Missions, 02/01/12). It profiled cities, organizations and churches moving their money out of banks that they consider to have had a negative impact on society. You might have heard about Bank Transfer Day. I, honestly, didn’t hear too much about the outcome of that action, but the idea of municipalities and institutions moving their money is interesting. There is the potential for real impact.

Consumer activism is the single device with the most immediate impact on corporations, and there are a few very celebrated cases. For example, about twenty years ago the Greens were upset with Shell for the way in which it proposed to dispose of a North Sea platform. In Germany, the Greens simply managed to boycott the Shell gas stations. And so Shell in that case bowed to what the Greens said they should do in answer to the customer boycott.

In general, though, the problem is how to make consumer actions really effective. In the case of Bank Transfer day — is this going to be a case where the person who takes their money out of bank A, puts it into bank B, and somebody takes it out of bank B and puts it into bank A? To have an effective consumer boycott is difficult. There’s little sense in simply doing things for the exercise of it and just simply moving money around without any particular long-term impact on the corporation.

Effective consumer action means collective action — it means a lot of people doing it. The Yes Magazine article gives a few example but particularly striking was the City of San Jose moving $1B out of the Bank of America. That’s a lot of money – enough to make the company sit up and take notice.

Actions like this have to threaten a vital corporate interest in order to effectively communicate their message. And the message has to resonate with other consumers. So you have to have a good communications effort, and someone has got to spend some money, some time and some energy. And, there’s no personal return on that investment so you have to have people who are sufficiently invested in the idea to want to commit themselves without any help or personal gain. That’s a rare species of humanity. In my life, I’ve spent a lot of time and a great deal of money on collective action efforts in the form of shareholder resolutions. It’s a topic I know well.

Ultimately, you want the management and board directors to have to react to any collective action. And they should react to things like the City of San Jose moving their money out of Bank of America. The company should have a special meeting and they should see exactly what steps the corporation has taken to put themselves in this position and they must be absolutely fastidious in insisting that the corporation in which they are director operate in congenial, compatible coexistence with societal values.

The City Council in San Jose made a very interesting and effective argument linking the number of Bank of America foreclosures in their community to lost jobs and lower tax revenues. It meant layoffs in public jobs, a decrease in public services and it had a detrimental effect on the community. They sent a very loud, clear message that they won’t tolerate poor corporate citizens – they’re not going to keep their money in a bank whose behavior has a negative impact on their community.

Confronting Power

The only way I know to combat corporate power as it now stands is for government to exercise its powers as owners of a preponderance of publicly traded stock. Self-regulation didn’t work and any attempts at government regulation are thwarted or circumnavigated. You can’t control a corporation from outside so owners must step into the breach. What do I mean by government owners? I mean the three categories of institutional ownership created by federal laws:

Investment Company Act of 1940 for mutual funds; Employees’ Retirement Income Securities Act of 1974 for employee benefit plans; And various statutes involving the Federal Reserve, the FDIC, the Comptroller, etc involving bank trusts.

Institutional ownership has fiduciary characteristics proscribed in the enabling laws, so I am stressing that the same standards of “stewardship of portfolio companies” should be expected of all institutions holding title pursuant to federal laws.

Nature didn’t create corporations and no god created corporations. People did, and so people have to solve this issue of corporations run amok. Corporations are creatures of man-made law and if they are more powerful that other creatures then people must address this. And, since corporations are really just groups of people, you can be certain the people who wield enormous corporate power will fight to hold onto that power.

Criminal Defense Attorneys

Our dedication to personal service and ease of access. All the injuries claims we represent are addressed by our lawyers. Every single client can get the private mobile phone number and email from the attorney handling their situation. Unhealthy news is the fact that litigating these claims can be challenging. You don’t only need to prove that sleep issues is likely for the injuries you may even face barriers for you to get compensated in case your claim exceeds the boundaries from the policy. If the occurs, your lawyer may go with you to identify yet another party to file a lawsuit. For instance, when the municipality unsuccessful to correctly keep up with the road, you could possibly sue them. We offer effective, aggressive analysis and representation to actually are treated fairly and justly. To place our experience and tradition of client service to get results for you, call a criminal defense attorney near you for a free consultation. An individual charged of an offence might be purchased through the court to pay for compensation to have an injuries, loss or damage they’ve caused to another person by committing the offence. A: Yes. When the owner understood or had valid reason to understand a criminal act might happen around the property and unsuccessful to accept proper steps to avoid it, he or she may take place responsible. Showing negligence in this sort of situation is much more difficult than the usual fall situation, but it is possible.

Grandparent Child Custody Allowed in Recent Court Decision

A recent court decision outside of Florida could have future implications for Florida child custody laws. The Supreme Court of South Dakota recently ruled that laws on the books in that state that allow grandparents to gain custody of grandchildren are constitutional.

Riverside family law lawyers CA noted that a lower South Dakota court had previously ruled the laws unconstitutional, because they allowed courts to award child custody to non-parents without first making a determination that the parents were unfit.

The rationale used by the South Dakota Supreme Court in upholding the laws was that the laws require judges to give special consideration to fit parents. The presumption is always that it is best for a child to be in the custody and care of a fit parent.

In other words, the first court said the laws were unconstitutional because they did not protect parents enough. But the Supreme Court decided the laws did have enough protections for fit parents.

The case will go back to the trial court for a new custody determination.

Advocates of the laws were pleased, because there are cases where children would be better off in the custody of grandparents than in the custody of unfit parents, or in foster care.

The child in the underlying case was a girl who had grandparents that sought custody after her parents broke up. The grandparents claimed the parents were unfit because of mental health issues and substance abuse problems.

South Dakota state law requires that a non-parent seeking custody must be a primary caretaker or parental figure for the child or have some other significant relationship with the child. They also say a parent’s presumed right to custody can be overcome only with proof of abandonment, neglect or other extraordinary circumstances.

The South Dakota Supreme Court looked at U.S. Supreme Court decisions and decided that the South Dakota laws had protections for fit parents, and did not require a finding that a parent was unfit before making a custody decision.

New Child Sex Abuse Charges Filed for Ex-Soccer Coach

A Washington County, Maryland, district judge has raised the bond of a man accused of new sexual criminal charges to $2 million from $725,000. The 45-year-old ex-soccer coach is already facing child pornography charges as a result of an April police raid of his Greentree Terrace home.

Maryland State Police and state prosecutors allege that a computer that was seized in the April raid has yielded additional evidence of child sexual abuse. Among the newly reported findings are 1,600 child pornography files and more than 130 hidden-camera videos of one particular female minor. The consequences of sex crimes are heavy. If you are wrongfully convicted, don’t delay speaking to a trusted Boynton Beach criminal attorney today.

Representation of Intellectual Property and Technology

Intellectual Property and Technology

Representation of Steven Spielberg, Michael Crichton, Anne-Marie Martin, Universal City Studios, Inc., Warner Bros., and Amblin’ Entertainment, Inc. as co-counsel in a copyright infringement suit. A screenwriter claimed the 1996 blockbuster film “Twister” was based on his screenplay “Catch the Wind” and sought damages in excess of $150 million. After a three-week trial and only two hours of deliberation, the jury returned a verdict which fully exonerated each of our clients.

Representation of Sands, Taylor & Woods against The Quaker Oats Co. in the remand hearing on damages related to Quaker’s infringement of Sands, Taylor’s “Thirst-Aid” trademark in its Gatorade advertising. The remand proceeding resulted in an award to Sands, Taylor of $20.6 million, reportedly the largest damages award in history in a trademark infringement case.

Representation of Pulitzer Prize-winning author Seymour Hersh defending libel claims brought by former Prime Minister of India, Moraiji Desai, based on allegations that Hersh’s book The Price of Power: Kissinger – The Nixon White House linked Desai to the CIA. The Seventh Circuit affirmed our jury verdict for Hersh.

Representation of McDonald’s Corporation by Gillick Wicht to challenge Quality Inn’s proposal to open budget motels under the name “McSleep Inns” and to challenge Arche Technologies, Inc.’s use of a “Golden Arch” trademark on computers. Victories in both cases further extended McDonald’s family of “Mc” marks beyond the field of food products and restaurants.

Elder Abuse and Brutality

A new study released in October of 2010 by the American Association for Justice named eldercare abuse as a humanitarian crisis. The study delved into patient reports and complaints of elder abuse including a Florida resident who was a significantly notable victim of nursing home abuse. The report of his abuse included numerous incidents of injuries suffered in multiple falls, severe weight loss, pressure sores, a number of infections, problematic dehydration, and starvation which eventually led to his death. If you are ever in a similar position, make sure to contact a reputable lawyers, like Dalli & Marino for your best chance of getting your case dismissed.

Advocates fighting for the rights of the elderly place a portion of the blame on the way that the nursing home system is run. Many nursing homes operate much like an apartment building, but instead of individual single or multiple bedroom units, the “bed capacity” is what is rented. A large portion of the generated income is “guaranteed by the federal government” and paid for through programs like Medicare and Medicaid.

Private businesses like schools usually have a higher faculty to student ratio than public schools, but the opposite tends to be true in of for-profit nursing homes. In fact, the American Association for Justice report found that “for-profit nursing homes have an average 32 percent fewer nurses and 47 percent higher deficiencies.” The cost-cutting has led to an increase in neglected or abused senior citizens. Critics of the system describe the problem as a “cost versus utility” societal issue. The level of care that the elderly require brings about a cost to the system and taxpayers that is higher than the amount of production that they can provide to society. The mentality, they say, has led to the significant instances of abuse and neglect.

If you’re seeking out help with elderly abuse or need Detroit police brutality legal help, don’t hesitate to contact an experienced attorney today.

How Safe are Seatbelts?

We all know that seat belts save lives. We read stories about people suffering serious, even fatal injuries that could have been prevented by seat belt use. Students in schools across the nation watch demonstrations about how seat belts protect people. Even though we know the facts and Louisiana state law requires vehicle occupants to be belted in for their own safety, some people are not heeding the message.

According to 7 KPLC, in the first 11 months of last year, Louisiana State Troopers wrote 6,632 seat belt tickets in the Troop D area alone. In December 2010, eight car accidents resulted in nine deaths. In these collisions, five of the vehicle occupants were not buckled up. Could these deaths have been avoided with the use of seat belts? While no one can say for sure, it has been proven time and time again that seatbelts undoubtedly save lives.

Seat belts protect people in a number of ways. First, they keep people from being thrown out of a vehicle in a collision, where several fatal injuries often occur. Also, seat belts spread the force of impact across a wide portion of the body, decreasing the risk of injury to any one area. Further, they give the body a chance to slow down more, reducing the risk of injury, while protecting the brain and spinal cord.

No one would go as far as to say that a person who is unrestrained will automatically suffer serious or catastrophic injuries in a crash or that people who buckle up are invulnerable. However, facts clearly indicate that seat belts significantly increase your chances of surviving a serious accident.

To illustrate this fact, Louisiana state police are traveling across the state with a rollover simulator. The device consists of a truck cab that spins on a motorized arm, simulating a rollover at 30 miles per hour. The hope is that people will watch the demonstration, believe it, and choose to buckle up in the future. An experienced personal injury lawyer at knows the ins and outs of these issues.

Seat Backs in Cars Not Strong Enough to Prevent Brain Injuries in Accidents

New mothers are always told that the back seat of the car is the safest place for their children as they grow from newborns to toddlers and into adulthood, but some mothers are learning that the piece of advice may not always be true. Children and other passengers riding in the back seats of vehicles are being seriously injured in even minor car accidents when the people sitting in the front seat are propelled into the back. What is causing them to shoot into the back of the car with enough force to cause life-threatening injuries or even death?

Front seats are collapsing as a result of force applied to the vehicle upon impact with another vehicle in a car accident. Some blame the federal government for having low seat back strength requirements and argue that many of the manufactured seating systems are defective and unreasonably dangerous as a result. The Federal Motor Vehicle Safety Standard 207, that sets the standard strength requirements for seat backs, was enacted in 1968 and has not been updated since.

The National Highway Traffic Safety Administration has reported that they are “considering” an update but have not yet done so. A number of lawsuits have been filed against manufacturers for allegedly defectively designed seating systems.

This tragic collision reminds us that each driver is responsible for following the rules of the road. We have a right to expect all motorists to pay attention to other drivers around them and act in accordance with traffic laws. Failure to obey even one rule, as illustrated in the funeral procession accident, can lead to injury and even death. Fortunately, car accident lawyers at can help with any case.