Compensation, auditing and board issues are proliferating this proxy season.
Patrick McGurn, special counsel, vice president and director-corporate programs, Institutional Shareholder Services Inc., Rockville, Md., calls them CAB issues. "I guess I'd call this proxy season the taxi season" because of the focus of corporate governance reform, he said.
Among the CAB issues, he said, activist shareholders are demanding:
-- linking pay to performance for executive compensation packages;
-- expensing executive options;
-- voting on golden parachutes, or excessive executive severance packages;
-- showing zero tolerance on non-audit fees;
-- voting for ratification of auditor;
-- rotating auditors periodically;
-- requiring independent boards;
-- electing directors annually; and
-- separating the positions of chairman and chief executive officer.
Many of this year's issues are the same as last year, according to Investor Responsibility Research Center, Washington. "Activists believe that despite major governance reforms implemented by Congress, the stock exchanges and the (Securities and Exchange Commission), some issues still have not been addressed adequately," an IRRC report noted.
Among companies, Walt Disney Co., Burbank, Calif., faces a "vote-no" revolt by Roy Disney and Stanley Gold at its March 3 annual meeting. Both quit as directors last year. The Roy Disney-Stanley Gold campaign calls for votes against Michael D. Eisner, chairman and chief executive officer, and three other directors: John E. Bryson; Judith L. Estrin; and George J. Mitchell.
ISS recommends a "no" vote only for Mr. Eisner.
An influential shadow hanging over this proxy season is the SEC proposal to grant shareholders access to the corporate proxy ballot to nominate directors in certain circumstances, Mr. McGurn said.
"It's already having an effect," he added, even though the proposal is still under consideration.
More companies than ever before have changed practices and policies in response to shareholder resolutions, which are non-binding.
Some 170 shareholder resolutions received a majority vote last year, while 36 companies made changes so far, he said. In recent previous years, "only a handful of companies" would respond positively to a resolution that received a majority of votes, he added.
"Clearly something changed," causing the companies to react to majority votes, he said. He attributes it to the SEC access proposal. One trigger for shareholder director nominations under the proposal would be a board ignoring a majority vote.
So far, 650 shareholder proposals have been filed for the proxy season, according to IRRC. Of them, 36% deal with executive compensation issues, compared with 44% last year and 19% in 2002.