A company with a classified board groups directors into classes, typically three, with each class elected at successive annual meetings. The Pension Funds are opposed to the structure because it limits shareholders’ ability to evaluate and elect a company’s entire Board of Directors on an annual basis and reduces accountability.

“The election of directors by classes, for three-year terms, in our opinion minimizes accountability and precludes the full exercise of the rights of shareholders to approve or disapprove annually the performance of a director or directors,” Thompson said in the supporting statement of the proposals. “We believe that the ability to elect directors is the single most important use of the shareholder franchise.”

The proposals are sponsored by the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System for the City of New York (TRS), New York City Police Pension Fund, New York City Fire Department Pension Fund and the New York City Board of Education Retirement System (BERS).

Collectively, the Pension Funds have more than $99.9 million invested in the six companies.

“Shareholders deserve transparency and access to real answers from their Boards of Directors,” Manhattan Borough President Scott Stringer said. “The classified structure stands as an impediment to openness and, in turn, has the potential to undermine shareholders when we should be in the business of embracing their best interests.”

The Funds submitted the proposal to six companies, three of which received the proposal for the first time, and three who received it for the second time. The three new companies are: Convergys Corporation of Cincinnati, OH; King Pharmaceuticals of Bristol, TN; and, Level 3 Communications of Broomfield, CO.

The proposal was resubmitted to: BEA Systems of San Jose, CA; ICOS Corporation of Bothell, WA; and, Newell Rubbermaid Incorporated of Atlanta, GA. In addition to the resubmissions, the Funds’ “Majority Vote Protocol” proposal also was filed at these three companies.

The “Majority Vote Protocol” proposal has been part of the Comptroller’s efforts over the last four years to advance a corporate governance measure under which companies would establish and disclose to their shareholders a board process for addressing shareholder proposals that are supported by majority votes cast at their annual meetings.

The Funds’ and Thompson targeted these three companies again because they refused to act on the classified board proposal supported by majority votes at their 2005 annual meetings. The “Majority Vote Protocol” proposal urges the Board of Directors of the companies to establish and disclose a board process for acting on shareholder proposals that win majority votes.

Unlike the failure of BEA Systems, ICOS Corporation and Newell Rubbermaid to act on the expressed will of their shareholders, the Charles Schwab Corporation responded positively to the 57 percent majority vote cast by its shareholders in favor of the City’s measure in October 2005. Schwab will seek approval of the proposal at its 2006 annual shareholder meeting.

“I am pleased that Charles Schwab has agreed to propose the repeal of the classified board structure to its stockholders and the annual election of its directors, and hope that other companies will establish procedures for acting on the expressed wishes of their shareholders,” Thompson said. “At the end of the day, classified boards are detrimental to long-term shareholder interests and limit the efforts of a bidder to acquire control or a challenger to engage successfully in a proxy contest.”

Besides Thompson, the Pension Funds trustees are:
Fire Department Pension Fund: Mayor Michael Bloomberg; New York City Fire Commissioner Nicholas Scoppetta (Chair); New York City Finance Commissioner Martha E. Stark; Stephen Cassidy, President, James Slevin, Vice President, Robert Straub, Treasurer, and John Kelly, Brooklyn Representative and Chair, Uniformed Firefighters Association of Greater New York; Peter Gorman, President and Captains’ Rep., Nicholas J. Visconti, Chiefs’ Rep., and Stephen J. Carbone, Lieutenants’ Rep., Uniformed Fire Officers Association; and, Joseph Gagliardi, Marine Engineers Association.
Police Pension Fund: Mayor Michael Bloomberg; New York City Finance Commissioner Martha E. Stark; New York City Police Commissioner Raymond Kelly (Chair); Patrick Lynch, Patrolmen’s Benevolent Association; Michael Palladino, Detectives Endowment Association; Edwin Mullins, Sergeants Benevolent Association; Anthony Garvey, Lieutenants Benevolent Association; and, John Driscoll, Captains Endowment Association.
NYCERS: New York City Finance Commissioner Martha E. Stark (Chair); New York City Public Advocate Betsy Gotbaum; Borough Presidents Scott Stringer (Manhattan), Helen Marshall (Queens), Marty Markowitz (Brooklyn), Adolfo Carrion (Bronx), and James Molinaro (Staten Island); Lillian Roberts, Executive Director, District Council 37, AFSCME; Roger Toussaint, President Transport Workers Union Local 100; and, Carroll (Carl) Haynes, President, International Brotherhood of Teamsters, Local 237.
TRS: New York City Finance Commissioner Martha E. Stark (Chair); Deputy Chancellor Kathleen Grimm, New York City Department of Education; and, Sandra March, Melvyn Aaronson and Mona Romain, all of the United Federation of Teachers.
BERS: mayoral appointees Schools Chancellor Joel Klein, Alan Aviles, Philip Berry, David Chang, Tino Hernandez, Augusta Souza Kappner, Richard Menschel and Marita Regan; Borough President appointees Jesse Mojica (Bronx), Martine G. Guerrier (Brooklyn), Vivian Farmery (Manhattan), Michael Flowers (Queens), and Joan Correale (Staten Island); and employee members Thomas J. Malanga of the International Union of Operating Engineers, Local 891, and Milagros Rodriguez of District Council 37, Local 372.
You can view a resolution at the Comptroller’s web site: www.comptroller.nyc.gov

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