New York State Attorney General Eliot Spitzer rightly has won much recognition for trying to improve conditions for investors, but others also deserve recognition for their efforts on behalf of investors.
The American Federation of State, County and Municipal Employees and its $600 million Washington-based staff pension fund, for example, would be recognized as "shareholder of the year," if there were such an award.
Its shareholder activism led to the most radical corporate governance reform proposal at the Securities and Exchange Commission — giving shareholders access to the corporate proxy statement to nominate directors, although in only limited circumstances.
Its resolutions for such access, filed at six companies, were effectively tossed out by the SEC. But the SEC then initiated a far-reaching study into shareholder involvement in the proxy process, including nominating and electing directors. The culminating SEC report, issued last July, devotes its opening page to describing the AFSCME as the catalyst for the recommendations. That study led to the current SEC proposal, which is still under comment.
Many investors and others, including Pensions & Investments, might disagree with AFSCME positions in labor and political issues. But as a shareholder, AFSCME is entitled, like any other shareowner in the market, to assert its ownership prerogative. Too few shareholders have done so, which is one reason for major problems at companies. The AFSCME, through that SEC proposal, seeks to bring more board accountability to shareholders and thus improve management and performance.
The AFSCME, joined by three leading longtime shareholder activists, already is seeking greater accountability at Marsh & McLennan Cos. in the wake the market-timing scandal at its Putnam Investments unit. The investors, anticipating SEC support, filed a resolution at M&M seeking to nominate some directors to the board.
Union power, while growing in the expanding public sector, is diminishing in private sector jobs. Yet the AFSCME was able to harness its power as a pension fund shareholder to become the dominant force shaping corporate governance reform in 2003.
Edward A.H. "Ted" Siedle, president, Benchmark Financial Services Inc., a consultant and brokerage firm, also should be recognized for his forensic-type consulting work uncovering improper activity regarding pension fund investing, especially over the last two years, and for longstanding warnings about unethical conduct at mutual funds.
Mr. Siedle earlier this year helped the Metropolitan Government of Nashville & Davidson County Benefit Board investigate an alleged conflict that led the fund to terminate a recently hired FIS hedge fund of funds.
Mr. Siedle also assisted the Nashville board in 2002 in obtaining a $10 million settlement from UBS PaineWebber Inc. in connection with directed brokerage payments for the $1.3 billion pension fund.
On mutual funds, Mr. Siedle has pointed out they "promised the benefits of diversification, professional management and comprehensive regulation. Investors were never fully informed as to the outrageous conflicts of interest prevalent throughout the industry and the quantifiable harm related to these conflicts." He has been a longtime critic of the SEC for its lack of oversight of mutual funds.
In addition, Mr. Siedle put together a book in 2002 compiling disciplinary histories of brokerage firms for investors, despite objection by the National Association of Securities Dealers. It easily allows investors to see the extent of disciplinary action and compare firms.
Mr. Siedle has been a strong voice for ethics and exposure of conflicts of interests. Both Mr. Siedle and the AFSCME have been strident voices seeking accountability to investors, and their efforts are beginning to bear fruit.
