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New York City Comptroller William C. Thompson, Jr. and the New York City Pension Funds have filed shareholder proposals calling on the board of directors at seven companies to establish a protocol for acting on shareholder proposals that win majority votes.

“Directors are elected by the shareholders, and as fiduciaries, should be accountable to the shareholders whose stockownership interests they are legally obligated to protect,” Thompson said. “When boards of directors systematically disregard the majority votes of their companies’ shareholders, they evince an unacceptable lack of accountability and indifference to the expressed wishes and concerns of the shareholders - a practice that, unfortunately, is common among far too many companies.”

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

The proposal was submitted to BEA Systems, Inc. of San Jose, CA; Clear Channel Communications, Inc. of San Antonio, TX; Credence Systems Corporation of Milpitas, CA; Cumulus Media, Inc. of Atlanta, GA; HCC Insurance Holdings, Inc. of Houston, TX; Neurocrine Biosciences, Inc. of San Diego, CA; and Ultratech, Inc. of San Jose, CA. The boards of these companies failed to communicate to the New York City Comptroller’s Office that they intended to take any action in response to the majority shareholder votes which New York City Pension Fund’ proposals won at their companies’ 2006 and/or 2007 annual meetings. A copy of the proposal can be viewed at www.comptroller.nyc.gov.

At the March 18, 2008 annual meeting of BEA Systems, shareholders showed strong support for the proposal with a 54 percent majority vote, compared to the 37.6 percent vote it received in 2007. 

Frustrated by widespread board indifference to New York City pension funds’ proposal that won majority votes, the New York City Comptroller’s Office initiated the “Majority Vote Protocol” proposal in 2003. The intent was to advance a new corporate governance measure that would give effect to the majority votes cast by shareholders in support of shareholder proposals. Specifically, the proposal, which is filed at companies whose boards of directors demonstrate unwillingness to respond constructively to majority votes cast in support of shareholder proposals, calls on the board of directors of companies to establish and disclose to their shareholders a board process for addressing shareholder proposals that receive majority votes.

The proposal requests that a corporation’s Board of Directors “initiate the appropriate process to amend the Company’s governance documents (certificate of inspection or bylaws) to establish 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.”

In addition, the process should provide for an independent board committee to meet with the proponent or proponents of the proposal to obtain additional information, within four months following the annual meeting at which the proposal won the majority vote. The independent board committee should subsequently present the proposal to the full board with its recommendation.

The Funds collectively hold 1,015,195 shares in BEA Systems worth $16,019,777; 48,439 shares in Clear Channel Communications, Inc. valued at $1,339,822; 336,672 shares in Credence Systems Corporation valued at $814,746; 173,103 shares in Cumulus Media, Inc. valued at $1,391,748; 1,399,483 shares in HCC Insurance Holdings valued at $40,137,172; 155,889 shares in Neurocrine Biosciences valued at $707,736; and 111,077 shares in Ultratech, Inc. valued at $1,259,613.

In addition to Thompson, trustees for the Pension Funds are:

New York City 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; Michael Currid, Captains’ Rep.; John J. McDonnell , Chiefs’ Rep., and Stephen J. Carbone, Lieutenants’ Rep., Uniformed Fire Officers Association; and, Joseph Gagliardi, Marine Engineers Association.

New York City 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 D. Mullins, Sergeants Benevolent Association; Thomas Drogan, Lieutenants Benevolent Association; and, Roy T. Richter, Captains Endowment Association.

New York City Employees’ Retirement System: 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, Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.

Teachers’ Retirement System: 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.

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