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Translation of an article
printed in the Nikkei Financial Daily
Severe earthquake of
corporate America
A battle of fathers No.3
<No.1-Warren Buffett, No.2-John C. Bogle,
No.4-Paul Volcker and so on>
Mr. Robert Monks
Pioneer of corporate governance says:"
Reform has just started."
He has called for expansion of voting <Text> The AGM of ExxonMobil, which was held in
Texas, Dallas on May 29th, underwent a big change. A shareholder
proposal, which sought to exploit alternative energy to fossil fuels for
environmental conservation, was supported by over 20%. Similar proposals had
been supported by less than 10% in usual years. A sudden jump in a
supporting rating attracted attention as an example to show groundswell of
shareholders' awareness regarding social responsibility of companies as well as
groundswell of social interests regarding global warming and other
environmental problems. This proposal was said to be supported by ISS as well as
CalPERS. It was Robert Monks (68) , a famous pioneer of shareholder activists, who
supported the environmental conservation group to submit the shareholder
proposal.
Robert Monks is the main player, who has
clarified fiduciary duty of pension investment in US, promoted voting by pension
funds and produced the origin of shareholder activists such as CalPERS. ISS,
which played a role in the EGM this spring by supporting merger between
Hewlett Packard and Compaq, was actually established by Robert Monks. It can
readily be said that he has set up an infrastructure of corporate governance
in USA. Big changes appeared one after another on AGMs in USA this year. A
shareholder proposal, asked that an AGM approval should be necessary for
a large-scale stock options, was approved by the AGM of Mentor Graphics.
This was proposed by TIAA-CREF. It is rare that a shareholder proposal passed
an AGM even in USA. Shareholders' consciousness has changed in
the wake of Enron. NYSE listing code was revised and Sarbenes-Oxley Act was
enacted by Bush administration with unusual speed. Robert Monks said:
" I have never seen such a groundswell of following wind for corporate
governance in my 30-year career."
Robert Monks was appointed Administrator of
the Office of Pension of the U.S. Department of Labour in 1984, and served
in that position until 1985. He concluded in that voting of holding stocks
was a fiduciary duty for institutional investors, getting on legal
interpretation of ERISA. He established ISS in 1985 when he left
U.S. Department of Labour. His idea was that service to help voting was necessary
for institutional investors to execute voting efficiently. His subordinate
officer at U.S. Department of Labour in 1988 announced the Avon Letter,
which officially acknowledged the obligation of voting for pension investors
for the first time. ISS utilised this opportunity to get customers such as
CalPERS, TIAA-CREF, Fidelity Investments and so on. He bought 100 stocks
of Sears, Roebuck in 1991 and became a NED candidate at its AGM. Although
he failed to get majority of shareholders, he shot to the world the
fundamental question that who was the owner of a company and what was a NED. He
launched LENDS, which was a fund to engage actively in invested companies as a
shareholder, in 1992 and it achieved high performance in 90's
Robert Monks warned that
Sarbenes-Oxley Act was just a start and never should be the last while he thought highly of
the current movement to reform corporate governance . He pointed out that
research for alleged involvement by JP Morgan Chase and Merrill Lynch in
accounting scandal of Enron was the focus from now on. He also complained about
current institutional investors in USA.He severely criticised them and
said:" It is extremely unbalanced. All shareholders activities are done by
public pension funds. Private pensions and investment trust companies have
done nothing." Although companies tend to increase the number of NEDs,
he still warned and said: "Corporate management have to have
shareholders express their opinions easily and have their pension funds engage
aggressively in invested companies. American capitalism will not be
healthy unless owners, or shareholders, activate and be
competent." MItazono Tetsuharu in New York
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