The U.S. government's restructuring of total compensation of top executives and highly compensated employees at seven companies that received financing under TARP leads the top 10 developments in corporate governance in 2009, as ranked by Marco Consulting Group Inc., Chicago.
American International Group Inc., Citigroup Inc., Bank of America Corp., Chrysler Group LLC, Chrysler Financial, General Motors Co. and GMAC Inc. received combined more than $250 billion in funds under the Trouble Asset Relief Program, according to a Marco report on its rankings.
The government, which became a shareholder in the companies, “took a passive role on most governance issues” involving them, except for executive compensation. Kenneth R. Feinberg, the Department of the Treasury's special master for executive compensation, restructured the total compensation for 136 executives at the seven companies, cutting it by 50%, according to the report.
The second top corporate governance development for the year as ranked by Marco is the public furor over bonus compensation at AIG, Merrill Lynch & Co. Inc. and Goldman Sachs Group Inc.
Third in the rankings is shareholder approval in 2009 of all compensation practices in advisory votes required of 400 companies that received TARP funding. “Institutional investors had no policies in place (to deal with the unexpected vote) and uninstructed broker voting … was allowed, which can represent between 10(% and) 30% of a vote at a company,” the report said. “Thus it was no surprise that every advisory vote on compensation was basically rubber-stamped by shareholders with an average vote of almost 90%.”
Filling out the top 10 are:
Fourth: the surge in support in vote-no campaigns for directors at companies.
Fifth: the Securities and Exchange Commission's elimination of uninstructed broker votes in director elections, effective Jan. 1, 2010.
Sixth: the SEC proposal of a rule to allow shareholder access to corporate proxy material to nominate directors. The SEC is expected to vote on whether to adopt the rule by the end of February, the report said.
Seventh: HealthSouth Corp.'s agreement to reimburse dissident shareholders in a proxy contest, the first major U.S. company to do so for “reasonable expenses” they incurred in a challenge to incumbent board members.
Eighth: a study by the Investor Responsibility Research Center Institute and Proxy Governance Inc. that shows dissidents on boards increase shareholder value.
Ninth: reincorporation in shareholder-friendly North Dakota becomes an option as shareholders file proposals at 17 companies to do so. The state's incorporation act provides for proxy access, reimbursement of expenses for successful dissident candidates to boards, majority-vote to elect directors and restriction on anti-takeover defenses.
Tenth: continued growth in support for having an independent chairman of the board of corporations.
