With the 2006 proxy season well under way, plan sponsors' programs to ensure that securities lending activity does not conflict with proxy voting are in high gear.
"Where there are corporate governance votes — key board votes that one could say loosely affect the direction of a company — investors are definitely more sensitized to voting their proxies," said Edward J. O'Brien, treasurer of State Street Corp., Boston, who added there was "no doubt" that proxy voting is generally becoming more important to plan sponsors.
"On the other hand there are still periodically annual general meetings where the sole item on the ballot is reappointing the general auditor," said Mr. O'Brien, who also is executive vice president of State Street's securities finance unit. "Investors need to decide whether it's worth taking (securities lending) trades off the books and forgoing possibly several million dollars (of securities lending revenue) to reaffirm the selection of an auditor."
William F. Pridmore, an independent securities lending investment consultant based in Chicago, noted that large, public pension plans have made "substantial" changes to their policies that cover securities lending and proxy voting over the last 10 years.
And this year, there's plenty to vote on.
Based on data from Institutional Shareholder Services, Rockville, Md., about 400 corporate governance resolutions have come to vote or are under consideration at U.S. companies this year through June 30, compared with 383 during the same six-month period in 2005, according to the Social Investment Forum, Washington.
Among those 400 resolutions are 71 calling for corporate board directors to be elected annually, 126 calling for a majority vote for directors and 150 resolutions on executive compensation. Some of the resolutions have been withdrawn after companies either amended bylaws or placed management-backed resolutions on the proxy.