This season's first binding proposal seeking majority voting received more than 49 percent of votes cast at Honeywell this week, according to the proponent, the American Federation of State, County & Municipal Employees (AFSCME).

That showing was significantly higher than the 20 percent vote received by a binding AFSCME proposal at Paychex in October. The Honeywell vote is also noteworthy, because the company had adopted a director resignation policy like those adopted by Pfizer and 85 other U.S. firms. Before the April 24 vote, the best showing for a majority vote resolution at a company with a resignation policy was the 45 percent support at Hewlett-Packard in March for a non-binding proposal by the United Brotherhood of Carpenters and Joiners.

Thirty six years after the first Earth Day, there is much environmental progress to celebrate. Since 1970, lead emissions are down 98 percent, particulate emissions are down nearly 80 percent and sulfur dioxide emissions have been cut in half. All of this has been accomplished despite a doubling of the number of cars on the road and a 75 percent increase in coal-fired power generation. Progress since Earth Day is living proof of what can be achieved when governments, companies, investors and consumers all pull together.

Yet on global warming, there is no such harmony of thought or will. Some are still not convinced that the problem is real or serious, or that if it is, the remedies are too costly to implement. Meanwhile, carbon dioxide emissions have climbed relentlessly since 1970 -- up almost 20 percent -- and global temperatures have risen by 1 degree Fahrenheit.

And here's the most troubling part. In the decades leading up to Earth Day, fossil fuel emissions were completely unfiltered -- no scrubbers on power plants, no catalytic converters on cars. The result was visible air pollutants that shrouded the atmosphere in haze and produced reflective clouds that allow less sunlight to reach the Earth. This "cooling effect" has been measured at 1.5 watts per square meter, offsetting more than half of the warming effect of greenhouse gases, now equal to 2.6 watts per square meter.

As we rid the atmosphere of these visible pollutants in our post-Earth Day world, the warming effect of invisible greenhouse gas emissions is growing more apparent. This may be one reason why all 10 warmest years on record have occurred since 1990 (in a temperature record dating back to 1861). And why the rate of warming is accelerating, with global temperatures projected to rise possibly five or even 10 degrees higher by the end of the 21st century.

So despite all of the accomplishments since Earth Day, the problem of global warming isn't going away; in fact, steps being taken to clean our air may be making it worse. Ways must be found to get at the root of this problem -- and soon -- in order to slow and eventually reverse the growth of carbon dioxide and other greenhouse gases. This will require energy and technology innovations that dwarf the remarkable environmental achievements of the last third of a century. And once again it will require governments, companies, investors and consumers all pulling together.

If there is a silver lining in this, it is that tremendous investment opportunities await those who anticipate a world less reliant on carbon-emitting fossil fuels. With new concerns expressed about "addiction to oil" and $3 per gallon gasoline, the marshalling of forces in this country to address the larger problem of global warming finally may have begun.

The culimination of a year-long effort to contribute to the global understanding of how institutional investors view and practice corporate governance. The study reflects the collective voice of institutional investors worldwide and is unprecedented in scale and scope, with over 300 institutions across 18 countries participating. To download the study, please visit here.

Findings from the ISS Global Investor Study wrap around five key themes, with an additional special report on investor views on corporate governance in China. The study data and commentary not only demonstrate investors' diversity but also the overriding universality of their concerns and objectives regarding corporate governance.

In the coming days, we will post the findings from the study on the blog. The first chapter of the study focuses on how corporate governance has shifted from a compliance obligation to a business imperative. Compliance provided the catalyst for the increased importance of corporate governance in recent years, with 94 percent of investors globally saying that corporate governance is important to their firms. Yet investors are now seeing corporate governance in a new light, recognizing it not only as an externally imposed obligation, but as an ownership responsibility, or "the right thing to do" in their words.

Increasingly, investors are also transforming corporate governance issues and activities into a competitive and portfolio advantage - some are using their corporate governance focus as a competitive advantage to differentiate their firms or funds, while others call corporate governance a competitive necessity "just to get in the game." Investors also are leveraging corporate governance to build portfolio value by enhancing long-term investment returns, mitigating risks, and providing a better picture of portfolio companies. And far from subsiding, 63 percent of investors globally believe corporate governance will become even more important over the next three years. Stay tuned for more...

William P. Barrett of Forbes has this article updating the SEC's seldom-used insider trading "bounty" program. The bounty program began in 1988, when Congress optimistically passed Section 21A(e) of the '34 Act, which authorizes the SEC, in its discretion, to award a bounty to a person who provides information leading to recovery of a civil penalty from an insider trader, a person who "tipped" information to an insider trader, or a person who directly or indirectly controls an insider trader. The bounty may be up to 10% of the civil penalty actually recovered in the SEC's action.

As discussed in this SLW post from December 2003, however, only three bounties had ever been awarded at that time, and only one known recipient existed: one "John L. Skipper," who received a check in the amount of $29,000 according to this SEC Litigation Release.

The Forbes article notes that an an additional $17,000 bounty was paid in 2005, and that the grand total for the four payments to date under the bounty program is now at a not-so-whopping $67,570.

According to SEC spokesman John J. Nester, the four payments since 1988 are as follows:

1989: $3,500
2002: $18,000
2002: $29,000 (to Mr. Skipper)
2005: $17,000

The Pension Fund Association (PFA), which represents Japan's corporate pension funds, plans to vote against directors who adopt "poison pill" plans and other takeover defenses without seeking shareholder approval.

The influential PFA manages 12 trillion yen in assets (approximately $104 billion), 4 trillion yen of which are invested in major domestic, exchange-listed corporations. While the association's investments represent only a small fraction of Japanese corporate pensions, it acts as a manager of last resort for insolvent funds.

In another sign of growing investor support for majority voting in director elections, Sprint Nextel shareholders this week endorsed an AFL-CIO proposal with 66.4 percent of votes cast.

The April 18 vote follows a 61.7 percent showing at Novell on April 6 for a United Brotherhood of Carpenters and Joiners proposal. These early votes suggest that majority voting will receive significant investor support this season at companies that have not adopted board election reforms, such as the director resignation policy adopted by Pfizer and more than 80 other U.S. companies since last June.

Over the past couple days, there has been a lot of attention paid by the media to dual-class equity structures and why they are so problematic for shareholders. At the New York Times Company's annual meeting on Tuesday, Morgan Stanley Investment Management teed up a protest vote against the company's Class A directors on the grounds that it was consistently failing to deliver value to its owners. Despite owning nearly six percent of the company's outstanding shares - a sizable chunk by most measures - Morgan Stanley's protest vote likely won't result in change at the company because the Sulzberger family controls nine of the thirteen seats on the board.

Preferred shares are nothing new in the media industry. Dating back to the early 1900's, preferred voting rights were originally established by many of the founding families at the large publishing houses to protect the journalistic integrity and independence of their newspapers. Today, they've morphed into the Superman of all take-over defenses, completely shielding underperforming and overcompensated executives and directors from any dissent or potential proxy contests. This presents a big problem for investors and unlike the comic books, there's no Kryptonite to combat it.

It should come as no surprise that ISS is against the establishment of dual-class equity structures in all cases as it is the single most disenfranchising thing a company can do to investors. For example, the presence of a dual-class structure by itself could drag down a company's CGQ score by tens of percentage points, even if a company has a clean bill of health on all other of its governance provisions (there are almost 250 companies in CGQ's coverage universe that fall in this camp).

We almost always support shareholder proposals seeking to eliminate dual-class structures. The actual elimination, of course, never happens because the people who benefit most from dual class structures control the voting power at the company. However, because these structures have a long legacy, we generally do not proactively withhold votes from directors at companies with dual-class structures in place unless there are other significant governance issues. Nevertheless, Morgan Stanley should be commended for taking a strong stand on the issue by sending a symbolic shot across the bow at this company. Unfortunately for investors, there are plenty of other targets out there.

Other major media companies with dual-class capital structures with unequal voting rights include Comcast (Roberts family), Media General (Bryan family), News Corporation (Murdoch family), Martha Stewart Living Omnimedia (Martha Stewart), The Washington Post Co. (Graham family), and Dow Jones & Co. (Bancroft family). And let's not forget Google - today's darling of the market - who is one of the newest members to this not-so-exclusive club.

The European Commission (EC) plans to hold a public hearing in Brussels on May 3 to gather more input on its future corporate governance priorities.

The EC's Action Plan on Modernizing Company Law and Enhancing Corporate Governance, which was initially adopted in 2003, is set to be updated with a new agenda. The public hearing will have four separate panels: on shareholder rights and obligations, on the modernization and simplification of European company law, on the responsibility of directors and internal controls, and on corporate mobility and restructuring. To participate, one must register by April 20. One may register through by visiting here.

Below are responses to Alan Murray's April 12 Wall Street Journal article titled "Corporate Governance Concerns are Spreading and Companies Should Take Heed." The responses ran in the Saturday, April 15 edition of the Wall Street Journal in Alan Murray's Talking Business column. Please email us your thoughts on the April 12 Wall Street Journal piece at blog@issproxy.com.

The interrelationship of corporate governance, structural and institutional variations in corporations, as well as companies' performance continues to attract the attention of both scholars and corporate governance professionals around the world. The following is a quarterly review of academic studies, scholarly articles and reports of interest to institutional investors.

Japanese company law amendments, which will be ushered in the coming months, contain a relatively nondescript change that could lead to more advance notice and less clustering of annual meetings in the world's second largest economy.

Though the amendments do not address these two problems directly, the legislation will allow companies to waive the requirement to obtain shareholder approval of dividend allocations. If many companies seek such waivers, this change would weaken the long-standing arguments that underpin laws forcing the concentration of meeting dates and the short notice periods.

Average pay for U.S. corporate directors shot up 14 percent between 2004 and 2005, while classified boards declined and committee independence levels reached an all-time high, according to a new ISS study on corporate boards.

The perennial study reviews and analyzes the structure, composition, and compensation of boards of directors among Standard & Poor's "Super 1,500" companies in order to identify the latest practices and emerging trends. This year's study, Board Practices/Board Pay 2006, looked at 1,269 S&P Super 1,500 companies that held annual meetings between Jan. 1 and July 31, 2005. The data analyzed was extracted primarily from proxy statements filed with the Securities and Exchange Commission.

Media giant News Corp. and an international group of institutional shareholders have settled a lawsuit concerning the company's poison pill takeover defense, according to an April 6 announcement by lawyers representing the shareholders. Groups such as the Connecticut Retirement Plans and Trust Funds and the Australian Council of Super Investors (ACSI), argued that the media company broke a promise to shareholders when it decided in August 2005 to extend its poison pill for another two years. In 2004, management, which sought-after shareholder approval to incorporate in Delaware, pledged that the company would refrain from activating a pill for more than 12 months without the prior approval of shareholders.

The settlement is great news on several fronts.

First, the New Corp. board will live up to its pledge to allow shareholders to decide if the pill stays in place. Many shareholders had relied upon this promise in voting on the company's proposal to switch its legal domicile from Australia to Delaware.

Second, the Delaware Court's decision to allow this lawsuit to proceed will make every board think twice before it seeks to back out of governance policies/guidelines that it has adopted in the past. The bulk of the governance reforms that have been adopted over the past several years, including dozens of policies calling for votes on future rights plans (poison pills), are found in these documents. If boards decide to ignore these policies, shareholders must resort to protracted battles to add similar provisions to the formal governing documents--the bylaws and the charter. Such a process would promote confrontation.

The significant collaboration by the Australian pension fund community and its international counterparts to hold News Corp. to its promise is probably one of the best examples to date of collective action by a broad range of global investors. In 2005, ISS recommended withholding votes on all the director nominees for a breach of trust with shareholders on the poison pill policy.

The settlement provides hope that New Corp. may be ready to improve its governance practices. We hope to see News Corp. follow up on this action by adopting more shareholder-friendly policies and practices. Please email us your thoughts about the News Corp. settlement at blog@issproxy.com.

In a victory for securities firms and business groups, the U.S. Supreme Court has ruled that investors who hold on to stock based on a company's fraudulent statements may not bring a class-action lawsuit in state court.

The Dutch parliament is showing last minute hesitation about tearing down anti-takeover measures for listed companies. All European Union members have to implement the 2004 European Directive on Takeover bids in national legislation by May 20, 2006. So far only Denmark has implemented the legislation.

Both the Dutch employer organisation and labour unions have lobbied parliament with the aim to keep some form of anti-takeover protection and they seem to be successful. Until recently a political majority supported the proposal of the Dutch government: When a bidder controls 75 percent of the shares, he can demand that all existing anti-takeover structures will be deleted and gain control.

Now however both the socialist party (PvdA), the Christian-Democrats (CDA) and even the right wing VVD party have voiced their concerns. The wave of recent takeovers emptying the Amsterdam stock exchange has strengthened this opposition. The Dutch politicians don't want Dutch companies to be unprotected while companies in other countries, dominated by major shareholders, cross holdings or government shareholdings are takeover proof.

This new development comes as something of a surprise. Many Dutch companies had already lowered there anti-takeover measures in anticipation of the new legislation. Many also bowed to shareholder pressure by divesting parts of the company, raising dividends and buying back shares. But now it seems that also in the battle for shareholder rights the old saying is true: It isn't over till the fat lady sings.

Last year, 58% of ISS' institutional investor clients providing policy input felt strongly that accountability for company performance should extend to directors. As a result of this feedback, ISS in 2006 adopted a new case-by-case director performance policy which considers issuing withholds on director nominees when performance lags.

The policy is based on a weighted average total shareholder return (TSR) measurement. The weightings are as follows: -20% weight on 1-year TSR, -30% weight on 3-year TSR, -50% weight on 5-year TSR. The TSR analysis serves as an initial screen. If a company does not meet the requirements of this initial screen, then ISS evaluates whether there is evidence of corrective action including: a company turnaround strategy, near-term performance improvement, changes in leadership and, proof that directors are responding.

Recently, Learning Tree and Fifth Third failed to meet the performance test. Ciena was identified initially for its lackluster performance over the past five years but, upon further engagement with the company, ISS made the determination that they had taken sufficient steps to correct their performance issues. All three companies triggered ISS' policy because they were poor performers within their specific GICS group, based on a weighted average TSR. However, at Learning Tree and Fifth Third, ISS recommended withhold votes, while at Ciena, ISS did not take action given their turnaround in recent performance.

Based on the outcomes at Fifth Third and Learning Tree, it appears that tying director accountability to long-term company performance will most likely take some time to play out in the proxy voting process. Yet, there is evidence of a growing movement to hold directors accountable for poor performance. According to a business article in the New York Times on Sunday, March 26, a new foundation has just formed called the Investors for Director Accountability, which hopes to influence institutional investors to hold directors accountable to shareholders.

ISS' new director performance policy is intended to send a signal to directors at some of the poorest performing companies to take steps to ensure shareholders realize positive long-term returns. We'd like to know whether or not you think accountability for creating shareholder value should extend to directors. To submit your thoughts, please email us at blog@issproxy.com