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View Teradyne Majority Vote Proposal
View Majority Votes Protocol
View Newell Rubbermaid Letter

NEWELL RUBBERMAID AGREES TO ADHERE TO FUNDS' REQUESTS

Comptroller William C. Thompson, Jr. has submitted shareholder proposals calling on Janus Capital Group, Inc. and Teradyne, Inc. to adopt a majority vote standard in the election of Directors, and the Boards of Directors at Newell Rubbermaid Inc., ICOS Corp., UnumProvident Corp. and BEA Systems to establish a majority votes protocol, a process for acting on shareholder proposals that win majority votes.

The proposals were filed on behalf of the New York City Pension Funds: New York City Employees' Retirement System (NYCERS), Teachers' Retirement System of 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).

"In theory, the election of directors is the most important shareholder franchise," Thompson said. "In reality, however, shareholders are effectively disenfranchised because nominees for election to a company's Board of Directors are routinely elected under the current system, even if shareholders representing a majority of the eligible shares vote 'Withhold" as an expression of their disapproval of the nominees. The disenfranchisement of shareholders is further evidenced in the widespread failure of Boards of Directors to seriously consider and act on shareholder proposals that win majority votes."

The Director Election Majority Vote Standard proposal requests that Boards of Directors eliminate the current plurality vote standard and "initiate the appropriate process to amend the Company's governance documents (certificate of incorporation or by-laws) to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of directors." 

That proposal was submitted to Janus Capital Group of Denver , CO .  The New York City Pension Funds are secondary sponsors of the proposal submitted to Teradyne of Boston, MA; the primary sponsor is the United Brotherhood of Carpenters Pension Fund.

Both companies subsequently informed the Comptroller's Office that their Boards of Directors adopted policies to address majority withhold votes in the election of director nominees. Generally, both policies provide for affected director nominees to tender their resignations to a Board committee, which will consider the resignation and recommend to the Board of Directors whether to accept it. The Board of Directors then will consider the committee's recommendation.

Thompson noted that his office informed the companies that the policies fail to satisfy the proposals because they fall short of establishing a "Director Election Majority Vote Standard", and simply give limited effect to majority withheld votes. Furthermore, the Boards of Directors failed to take the necessary steps to incorporate a "Director Election Majority Vote Standard" in the companies' by-laws, as called for in the Funds' proposals. Consequently, the decision as to whether a director nominee continues on the board is left to the discretion of the directors, rendering the shareholder majority withhold vote non-determinative.  

"It is totally unacceptable that under the current plurality voting standard, a director nominee could be elected by a single vote despite the disapproval of a significant majority of the company's shareholders," Thompson said. "The current system  is contrary to basic principles of fairness and democracy, and severely undermines shareholder rights and director accountability.  In those rare instances where a majority of shareholders withhold their votes in the election of a director, that director should be required to step down."

Meanwhile, the "Majority Votes 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 proposals have been filed in response to the unwillingness of many corporate Boards of Directors to acknowledge majority votes.

"Investors must vigorously oppose the blatant disregard that many corporate Boards of Directors continue to show for shareholder proposals that win majority votes," Thompson said. "The accounting and financial scandals of the past year have highlighted the importance of such adopting governance reforms across America ."

The "Majority Vote Protocol" proposal was submitted to BEA Systems of San Jose, CA, ICOS Corp. of Bothell , WA , UnUmprovident of Chattanooga, TN and Newell Rubbermaid Inc. of Atlanta , GA. Newell Rubbermaid recently agreed to comply with the Funds' request; The Comptroller subsequently withdrew the resolution.

The proposals specifically request that a corporation's Board of Directors "adopt a policy establishing an engagement process with the proponents of shareholder proposals that are supported by a majority of the votes cast, excluding abstentions and broker non-votes, at any annual meeting."

The Funds collectively have: nearly 160 thousand shares of ICOS Corp valued at $3.9 million; 813 thousand shares of Unumprovident valued at $18.3 million; nearly 600 thousand shares of Teradyne, Inc. valued at $9.5 million; 2.4 million shares of Janus Capital valued at $51 million; and 1.2 million shares of BEA Systems, Inc. valued at $12.6 million.

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; Edward 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.