If the Council of Institutional Investors represents shareholder activism, the newly formed National Coalition for Corporate Reform may well embody shareholder militancy.
The group — led by Alan G. Hevesi, New York state comptroller; Philip Angelides, California state treasurer; Richard H. Moore, North Carolina state treasurer; Denise L. Nappier, Connecticut state treasurer; Michael L. Fitzgerald, Iowa state treasurer; and elected officials from other states as well as other major public fund and union fund leaders — wants to assert the influence of big institutional investors to remake corporate governance, especially giving shareholders more power.
From its outset, the National Coalition for Corporate Reform might well adopt as its motto: you're either with us, or you're out. It wants only like-minded institutional investors that will wholeheartedly endorse corporate governance reform positions, not a broad sweep of membership such as the CII has. For that reason, its has no corporate fund members, at least yet. Participation of corporate funds in the coalition "is theoretically possible, if they agree with our positions," David Neustadt, director-communications for the New York state comptroller's office. The coalition, which was Mr. Hevesi's idea, at its first organizational meeting in November decided against adopting a formal structure so it could stay nimble to quickly adopt advocacy positions.
"It's an unstructured, grassroots-type of uprising," said Mr. Fitzgerald.
The coalition has two immediate targets: the New York Stock Exchange reforms and the proposed Securities and Exchange Commission rule giving shareholders access to corporate proxy ballots to nominate directors.
The group is calling on John Reed, NYSE interim chairman, to make public the findings of his investigation into the NYSE. "We want to restore confidence in the exchange," Mr. Fitzgerald said.
On the SEC access proposal, Mr. Neustadt pointed out that even if it had already been in place, shareholders still couldn't nominate directors to the boards of HealthSouth Corp. Tyco International Ltd. or other companies where egregious examples of corporate fraud and malfeasance are alleged. The SEC proposal triggers shareholder access only in two limited circumstances. Mr. Fitzgerald said the group favors broader access. It's not easy criticizing the SEC proposal, because it probably represents the biggest change in corporate governance in the SEC history. But the proposal is flawed.
A contingent of the NCCR met with SEC officials Dec. 2 about the access proposal, said Mr. Fitzgerald, who didn't attend the meeting.
"When apparent inappropriate governance activity happens at corporations, we want to be able to bring nominations to the board." Mr. Fitzgerald said. The SEC proposal requires triggers that occur over a cycle of two annual meetings.
"We don't want to be disruptive of corporate activity," he added. "We're fiduciaries." The NCCR merely wants to institute reforms as quickly as possible, he said.
The NCCR is different from the CII, he said, noting the Iowa fund and other NCCR funds participate in both groups. The coalition "can exercise its authority more quickly than the CII can."
The CII board and diverse membership slows advocacy, Mr. Neustadt said. "But our goal isn't to organize every institutional investor," he added. "The goal is to agree on certain ideas. It's a group defined by its ideas."
Other investors might have concern that politicians will use the coalition for advancing political agendas, rather than investment agendas, which often don't coincide.
So far, the coalition's ideas advancing shareholder interests are good ones.