Yesterday's 50.3 percent investor vote at Bank of America for a binding independent chair proposal should provide more momentum for the shareholder campaign for this reform. The Charlotte-based banking company responded by stripping CEO Ken Lewis of his chairmanship and appointing Dr. Walter Massey as chairman.

The vote on the independent chair proposal is the third majority vote this year (in addition to Weyerhaeuser and Office Depot), and is further evidence that these resolutions are getting broader support from institutional investors. The vote also is the highest ever for a binding proposal on this topic. So far, independent chair proposals have averaged 39.2 percent support at 11 U.S. companies where preliminary results are available, up from 29.3 percent in 2008, according to RiskMetrics Group data.

"I think the issue of an independent chair has finally resonated with mutual funds and other large institutional investors as an effective mechanism to begin balancing risk and risk management at the board level," said Tracey Rembert of the Service Employees International Union, which filed the proposal at Bank of America. "The financial crisis--and utter mismanagement of some financial companies--has helped to mainstream the issue as a governance centerpiece on its own merits also."

Bank of America is the latest large financial firm to appoint an independent chair in response to shareholder demands. Before the global financial crisis began in 2007, none of the major Wall Street or banking firms had independent board chairs. Washington Mutual and Wachovia appointed independent chairs in 2008 after significant shareholder support for the reforms. In February, Citigroup appointed Richard Parsons to replace Win Bischoff, a non-independent director who became chair in December 2007 after the ouster of CEO and Chairman Charles Prince.

Also this week, a binding independent chair proposal received 30.4 percent support at Wells Fargo, up from 28.3 percent last year. Independent chair proposals are slated to appear on the ballots at Time Warner on May 1, CVS Caremark (May 6), Verizon Communications (May 7), Prudential Financial (May 12), Pulte Homes (May 14), and ExxonMobil (May 27).

The CtW Investment Group is calling on Bank of America (BAC) to refrain from counting uninstructed broker votes in board elections at tomorrow's annual meeting in Charlotte, North Carolina.

CtW, the investment arm of the Change to Win labor federation, is waging a "vote no" campaign against CEO and Chairman Kenneth Lewis, lead director Temple Sloan, and one other director; press reports indicate that Lewis may not get majority support. The California Public Employees' Retirement System, the California State Teachers' Retirement System, and the Florida State Board of Administration are joining other public and labor pension funds in opposing Lewis. Most of the opposition to Lewis stems from the company's recent acquisition of ailing brokerage firm Merrill Lynch.

In an April 27 letter to governance committee chair Thomas Ryan, CtW urged the committee to exclude broker votes when determining if a director received majority support, as required by the banking firm's election standard. CtW estimates that broker votes (which traditionally are cast for management nominees) could account for about 25 percent of the votes cast, which would allow Lewis to win reelection if he receives about one-third of the remaining votes.

"While brokers can still legally cast uninstructed votes in Wednesday's BAC director election, the BAC board need not, and indeed must not, condone this corrosive and soon to be banned practice by counting them toward its majority vote election standard," William Patterson, executive director of CtW, wrote in his letter.

According to press reports, the Securities and Exchange Commission may take final action this week to approve a New York Stock Exchange rule change to bar brokers from casting uninstructed client shares in uncontested elections. If approved, the rule change would not apply until the 2010 proxy season.

The CtW letter recalled the controversy that erupted after CVS director Roger Headrick was elected with the help with broker votes in 2007. "The BAC board's credibility has already suffered as a result of governance and disclosure failures that have triggered shareholder litigation, an investigation by the New York Attorney General and ongoing inquires by Congress and the SEC," Patterson wrote. "The board can ill-afford a tainted election that would also call into question its legitimacy, particularly at such a sensitive moment."

Apple said yesterday it would hold an annual advisory vote on executive pay in 2010 after a shareholder proposal on that topic won majority support for the second year in a row.

Apple is the fifth U.S. company this year where a "say on pay" shareholder proposal has earned a majority of the votes cast "for" and "against," according to RiskMetrics Group data. Similar resolutions have obtained majority backing at Pfizer, Edison International, Hain Celestial, and Lexmark International.

Apple announced the policy change in a press release, in which the company reported that a proposal filed by the American Federation of State, County, and Municipal Employees received 51.6 percent support at the technology company's Feb. 25 annual meeting. Apple originally reported that the resolution was defeated because it counted abstentions as "no" votes. The company said the mistake was "due to human error." In 2008, an AFL-CIO "say on pay" proposal received 50.7 percent support.

"The Compensation Committee of Apple's Board of Directors has been closely following the Say on Pay issue, and anticipates that new laws or regulations will require some form of Say on Pay vote at all public companies in the near future. Even if that does not occur, Apple is committed to implementing an advisory Say on Pay vote next year," the Cupertino, Calif.-based company said in the press release.

In 2007, six directors received opposition ranging from 23 percent to 36.8 percent after Apple announced a $105 million restatement to account for misdated stock options. The Securities and Exchange Commission also investigated Apple and sued two former company officials.

Apple is the 22nd U.S. issuer to voluntarily agree to hold an advisory vote, according to RiskMetrics data. In addition, several hundred financial firms that receive support from the Treasury Department's Troubled Asset Relief Program are required to hold pay votes this year. Governance observers and activist investors expect that Congress will approve legislation this year to require all listed companies to hold pay votes.

An annual vote on compensation is one of the requirements in the wide-ranging "Shareholder Bill of Rights of 2009" legislation that U.S. Senator Charles Schumer of New York plans to introduce soon.

Schumer is circulating a "dear colleague" letter to his fellow senators in which he asks them to consider co-sponsoring the bill. According to Schumer's letter, the legislation would confirm the authority of the SEC to issue a proxy access rule to enable investors to nominate board candidates. The bill would also require issuers to: obtain shareholder approval for "golden parachute" packages; declassify their boards and hold annual elections where directors would have to earn a majority of votes cast; separate the positions of CEO and board chair; and appoint a separate risk committee.

Carl Icahn is practicing what he preaches.

American Railcar Industries, which is controlled by Icahn, will ask its investors on June 10 to approve moving the company's corporate home from Delaware to North Dakota.

Shareholder approval is not in question since Icahn, who serves as chairman, and other directors own 56.7 percent of the Missouri-based company. American Railcar would become the first public company to reincorporate in North Dakota and agree to be subject to the state's novel corporate governance law, which was passed in 2007 after a lobbying campaign that Icahn supported. The billionaire investor has said he pushed for the law to provide an alternative to Delaware, where more than 60 percent of large-cap U.S. companies are incorporated. Icahn has complained that Delaware laws and courts unduly favor management interests in disputes with shareholders.

The North Dakota law requires firms to provide a wide range of shareholder-friendly governance provisions, such as proxy access, an independent board chair, a declassified board, limits on poison pills, and an annual advisory vote on compensation. In a preliminary proxy filing, American Railcar asserts that a move to North Dakota will give investors more rights while reducing the firm's franchise taxes.

Icahn also has filed a North Dakota reincorporation proposal at Amylin Pharmaceuticals, where he has a 9.2 percent stake and is waging a proxy fight at the company's May 27 meeting. In addition, individual investors have filed similar proposals at 17 other firms this year. These resolutions will be on the ballot at Sempra Energy on April 30, Amgen on May 6, and at PG&E and Qwest Communications on May 13. So far, those proposals have averaged 6 percent support at three companies, according to RiskMetrics Group data.

European Union lawmakers today approved new rules for credit ratings agencies designed to promote transparency and to help ensure such firms are free from conflicts of interest.

The $5 billion-a-year ratings agency industry, led by Standard & Poor's and Moody's, has in recent months come under heightened scrutiny on both sides of the Atlantic for failing to adequately warn investors of risks underlying mortgage-backed securities tied to subprime loans.

Under the new rules, firms seeking to issue credit ratings in the EU would need to register with the Committee for European Securities Regulators (CESR), while a "college" of regulators would monitor an individual agency on a day-to-day basis.

Arguing credit ratings agencies contributed "significantly" to problems now affecting global capital markets, European Commission officials noted the rules would bar firms from providing advisory services and from rating financial instruments "if they do not have sufficient quality information to base their ratings on." The rules also force firms to disclose the models, methodologies and key assumptions upon which they base their ratings, officials noted in an April 23 press release.

With regard to transparency and accountability, credit ratings agencies will be required to publish an annual "transparency report" and to have at least two independent directors on their boards whose pay cannot be based on firm performance and who can be dismissed only in cases of professional misconduct. At least one of the directors must be an expert in securitization and structured finance, and terms would be capped at a maximum five years without the ability to re-nominate.

The new rules "will help give investors the information, integrity and impartiality they need from credit rating agencies if they are to make prudent investment decisions that create growth and jobs instead of bubbles of excessive risk," European Commission President José Manuel Barroso said. The rules "… are the latest example of the EU leading the world in responding to the economic and financial crisis, restoring confidence and preventing a repeat."

The rules received strong backing from EU parliamentarians who voted 569-47 in favor of the measures.

In the U.S., meanwhile, regulators and others also are focusing on potential credit ratings agency reform. At an April 15 roundtable, U.S. Securities and Exchange Commission chair Mary Schapiro acknowledged the need for ratings agency reform, telling attendees the firms' evaluation of securities backed by residential subprime loans, and the collateralized debt obligations linked to such securities, has "shaken investor confidence to its core."

U.S. investor organizations, including the Washington-based Council of Institutional Investors, also have actively backed credit ratings agency reform efforts calling for greater accountability and stronger oversight of such firms. In a CII-commissioned paper released earlier this month, the authors call for enhanced oversight by creating a new credit rating agency oversight board or supplementing the SEC's authority to substantively regulate rating agency practices. Notably, the paper also recommends removing rating agencies' exemption from liability under the Securities Act of 1933, and to make Nationally Recognized Statistical Rating Organizations, such as credit raters, subject to private rights of action under the anti-fraud provisions of the securities laws.

A new mortgage bill was recently announced by the House Financial Services Committee that would require mortgage originators to retain a minimum of 5% of the credit risk of a mortgage. The provision is part of a much broader effort to curb risky lending practices, and seeks to encourage more responsiblelending by preventing lenders from off-loading the risk of the loans they originate.

Although the bill has garnered vigorous opposition from industry groups, and will not likely be passed in its existing state, the risk retention provision marks an important step in the right direction by addressing the misalignment of incentives that has been at the root of the current financial crisis.

Our research has identified four broad effects of the legislation:

* Consumers will benefit from greater accountability: No longer able to off-load credit risk, lenders will have an incentive to make more sustainable loans based on the borrower's reasonable ability to repay.

* Non-bank lenders will need to raise capital: Lacking a deposit base, many non-bank mortgage originators will have to raise capital and fundamentally rethink their business models if they are to keep a greater proportion of loans on-balance-sheet.

* Banks that originate-to-hold will benefit from increased market share: As smaller lenders are pushed out, banks that underwrite sustainable loans with the intention of keeping them on-balance-sheet will have a competitive advantage in the new regulatory environment.

* Effects on securitization are unclear: On one hand, forcing lenders to retain credit risk could increase investor confidence in securitized products. On the other hand, complementary measures in the bill allow the final investor to be sued by a borrower who is the victim of a fraudulent or predatory loan.

The pending bill also include measures that 1) empower borrowers to sue investors if the victim of a predatory or fraudulent loan, 2) set minimum standards for mortgages based on the borrower's documented ability to repay, and 3) require that refinancing yields a net tangible benefit for borrowers.

While the bill as a whole is largely based on a bill passed by the House in 2007, the risk retention provision is a new addition that could mark a larger shift toward addressing incentives in the wave of US bank regulation that is to come.

Conducted by the Carbon Disclosure Project (CDP), on behalf of some 475 institutional investors with $55 trillion in assets under management, and sponsored by CalSTRS, the Electric Utilities Report 2009 analyzes 110 climate change responses submitted to the CDP from the world's largest publicly quoted electric utilities to examine how the industry currently measures and manages greenhouse gas emissions.

Report Key Findings
* The response rate on climate change reporting from the world's largest 249 utilities companies has improved, from 44 to 53%, since the first electric utilities report in 2006, with a marked increase in the US response rate from 48 to 67%.

* Only a small number of utilities are setting and disclosing absolute targets for reducing greenhouse gas emissions.

* Just under half disclosed electricity generation capacity and production figures by fuel type (e.g. coal, gas) which is a critical factor for investors in making decisions.

* Australia's AGL at 81 and Iberdrola and Endesa from Spain at 82 and 85 respectively score highest for best practice disclosure under the Carbon Disclosure Leadership Index (scores from 1 to 100).

"This raises the question of how much utilities are willing to pay to cut their emissions – or pass costs onto customers – as emissions trading schemes and/or carbon taxes come into play," said lead author Doug Cogan, director of climate risk management for RiskMetrics Group. "Improved disclosure on forecasted capacity and production would help investors to better assess exposure to such carbon limits at this pivotal time in national and global climate regulation."

To access the full report, please visit here. RiskMetrics will also be hosting a webcast on Wednesday, April 29 at 11:30 a.m. EDT to cover the findings from the report. To register for the webcast, please visit here.

The financial crisis has generated extensive debate among financial market participants about the use of fair value measurements in financial reporting. The Financial Accounting Standards Board (FASB) recently issued new fast-tracked guidance that relaxes some of the requirements for fair value measurements, while also increasing disclosure requirements.

RiskMetrics will host a webcast on Thursday, April 23 at 11:30 a.m. EDT, where FASB Board Member Marc Siegel will offer insight on the fair value debate, including:

* the role FASB is playing in responding to the financial and economic crisis;
* the use of fair value in current GAAP, and the related controversy;
* the process FASB follows in issuing guidance;
* other issues FASB is currently working on.

Jeremy Perler and Dan Mahoney, Heads of Accounting Research for RiskMetrics Group, will moderate the webcast and provide an overview of RiskMetrics' research on the topic of fair value. To sign-up for webcast, please visit here.

Independent chair proposals won 59 percent support at Weyerhaeuser and 42.5 percent support at Texas Instruments on April 16, according to proponents.

The votes are further evidence that proposals seeking independent board chairs will fare better this season than in 2008, when those resolutions averaged 29.3 percent support, according to RiskMetrics Group data. Earlier this year, independent chair proposals received a 42.5 percent vote at Deere & Co. and 34 percent support at Whole Foods Market (up from 27.2 percent last year.)

The proposal at Weyerhaeuser, a Federal Way, Wash.-based timber company, was filed by the Laborers' International Union of North America.

The resolution at Texas Instruments, a Dallas-based semiconductor firm, was submitted by Railpen Investments, a British pension fund. "We see this as a significant expression of shareholder concern about the lack of effective independent board leadership," Frank Curtiss, head of corporate governance for Railpen, said in a press release. "We hope that the board will take heed and engage with shareholders on this important matter."

The proposals are part of a broader investor campaign on the issue this year. Shareholders have filed 39 independent chair proposals for the 2009 proxy season, according to RiskMetrics data. Eight resolutions have been withdrawn, and three were omitted.

A binding independent chair proposal filed by the Service Employees International Union likely will do well at Bank of America's annual meeting on April 29. A proposal on that topic won 36 percent support in 2008. Investor Jonathan Finger, whose family owns 1.1 million shares and is waging a "vote no" campaign against Chairman and CEO Kenneth Lewis and two directors, said he expects that the proposal will win majority support, according to news reports. RiskMetrics and two other proxy advisory firms have advised their clients to support the independent chair resolutions.

The AFL-CIO has launched its "2009 Executive PayWatch" Web site that highlights what the labor federation views as the 10 "worst" corporate pay practices.

"Americans are rightly angered by CEOs who haven't learned their lesson," AFL-CIO Secretary-Treasurer Richard Trumka, said in an April 14 press release. "After driving the economy into the ground and gambling with the nation's retirement savings, these same corporations are giving out huge bonuses for bad behavior."

Among the pay practices criticized by the AFL-CIO are:

--SunTrust Banks' plan to grant $7.7 million in stock options to CEO James Wells. The company has received $4.9 billion in federal support from the Troubled Asset Relief Program.

--The more than $500 million in salaries and retention payments paid by American International Group to senior employees since the company was rescued by the federal government, which has spent $170 billion to keep the insurance company operating.

--The changing of performance goalposts, such as the steps taken by homebuilder Toll Brothers after it became clear that CEO Robert Toll would not receive a bonus under the old standards. According to the AFL-CIO, the company now ties the CEO's bonus to a percentage of its income before taxes and bonus, as well as "squishy" factors, such as "management enhancement and efficiencies, and financial market visibility and access."

--"Lavish" perquisites, like the $400,000 in tax preparation and financial planning services provided to Ray Irani, the chief executive of Occidental Petroleum.

--"Golden coffin" benefits, such as the more than $40 million in stock, life insurance, and other benefits that the heirs of Shaw Group CEO James Bernhard would receive if he dies.

--"Golden parachute" benefits, such as the $14 million exit package that Richard L. Bond was to collect after stepping down as chief executive of Tyson Foods in January.

In addition, the AFL-CIO has filed 17 proposals this year that seek advisory votes on compensation, investor votes on death benefits, more disclosure on compensation consultants, hold-through retirement rules for equity grants, and other pay reforms, according to RiskMetrics Group data.

Until recently, advance notice bylaws garnered modest attention, with most viewing the rules as little more than a means to ensure orderly shareholder meetings, rather than as a strategic defense. Indeed, courts had generally upheld advance notice requirements giving companies little cause for concern. But that thinking changed when, early last year, the Delaware courts handed down two noteworthy decisions that read together suggest a judicial move towards a narrower interpretation of such provisions. Shortly thereafter, a federal district court in New York rendered an opinion stressing the importance of derivative ownership disclosure in a company's advance notice bylaws. As a result, issuers and corporate law firms have sharpened their focus on language contained in such provisions and the provisions' broader intent.

Against this backdrop, RiskMetrics' recently released 2009 Governance Background Report: Advance Notice Requirements provides an overview of the purpose of advance notice bylaws, recent legal decisions tied to such requirements, and the reaction of corporations to address potential deficiencies in such provisions.

Key takeaways from the report include the following:

--Hedging and derivative disclosure requirements in advance notice bylaws provide useful information to management, the board and shareholders about the extent to which a shareholder proponent's economic interest in the company's shares are aligned with the economic interests of other shareholders, provided they are not overly restrictive;

--RiskMetrics reviewed regulatory filings for 25 S&P 500 companies with annual meeting dates between Jan. 1 and March 1, 2009, of which 11, or 44 percent, had made amendments to their advance notice bylaws over the previous year. However, none of the companies sought shareholder approval;

--Of the 11 companies that made amendments to their advance notice bylaws, five included language requiring a director nominee to fill out a questionnaire; and

--Recently, the UK's Financial Services Authority adopted rules requiring the disclosure of holdings, including derivatives, effective June 1. The FSA's actions may lead to calls for similar reforms across the Atlantic.

To purchase a copy of the report, please visit the "New Titles" section of RiskMetrics' online bookstore.

In a symbolic protest, the British government joined many other investors in voting against the Royal Bank of Scotland's past remuneration practices on April 3.

The company's remuneration report received 90.4 percent opposition from the votes cast–the most ever during an advisory vote on executive compensation. Most of the opposition came from the government, which obtained a 57.9 percent voting stake after rescuing the failed banking firm in October. The company recently posted the largest quarterly loss in British history, and the government now has a 70 percent interest after investors approved a rights offer/preference share redemption on April 3.

Before the RBS shareholder meeting in Edinburgh, most of the news coverage and investor outrage focused on the pension package received by the former CEO, Sir Fred Goodwin. He is to get an annual pension of 700,000 pounds ($1.02 million); Goodwin received an initial payment of 2.8 million pounds and the company paid his taxes. RBS has acknowledged that the payments were not "standard practice" but told the Treasury that they were "considered appropriate arrangements for [the company] to make in discharge of his contractual obligations."

The government's vote against the remuneration report can be seen as a public relations move, since the company has already worked with Treasury to bring its pay policies closer to best practices. For instance, RBS agreed to pay no 2008 bonuses for executive directors; provide no increases in basic salaries in 2009; defer 2009 annual incentives for three years (with a "claw back" provision); make no payments under a profit-sharing plan; and reduce long-term incentive awards below 2008 levels. In addition, 12 directors, including the remuneration committee chair, have stepped down since October.

U.K. Financial Investments (UKFI), which manages the government's stake, said it voted against the retrospective pay report because it objected to the board's decision to allow Goodwin and Johnny Cameron, the former head of the investment banking unit, to retire early and thus take undiscounted pensions. In a press release, UKFI chief executive John Kingman said the government "fully supports the approach the present RBS board is taking to remuneration matters, including in relation to the remuneration arrangements for the present chairman and chief executive."

In a move being lauded by financial institutions and others, the Securities and Exchange Commission today unanimously approved five separate proposals to curb the short selling of shares. The proposals will be subject to a 60 day public comment period.

One market-wide proposal would reinstate the "Uptick Rule," which has regulated short selling since the late 1930s. The rule, allowed short sales only when a share was trading up in order to prevent precipitous declines in share price due to continued shorting, was eliminated in 2007.

Another market-wide proposal would provide for a modified version of the uptick rule, whereby a short sale price test would be based on a national best bid. Three other proposals would effectively impose a "circuit breaker," limiting short sales during a trading session on stocks that have declined in excess of 10 percent.

Critics of short selling, which allows for a profit on a decline in share price, say the practice–and so-called "bear raids" to bring down a stock to cover a short position–led to the collapse of firms including Bear Stearns and have contributed to the ongoing decline in capital markets. Proponents argue the practice allows for price discovery, however, while also providing a means to identify corporate laggards.

Hedge funds and others who commonly employ a short selling strategy decried the proposals. "It seems like short sellers are a total scapegoat in this instance, and regulators want to look like they're protecting individuals," Richard Gates, portfolio manager at long/short mutual fund TFS Capital, told Reuters. "I'm not sure this is the most effective way." Some 60 percent of brokers, hedge funds, and other institutional investors surveyed by research and consulting firm TABB Group said liquidity will suffer if the original uptick rule is reinstated, according to Reuters. More than 80 percent said hedge funds would be hit hardest.

The American Bankers Association was among those welcoming the today's proposals, however. "Without the limits imposed by an uptick rule, short-sellers have been generating lower prices and creating 'bear raids' on bank stocks," ABA officials said in an April 8 statement. "Reinstating the 'speed bump' imposed under an uptick rule is the right thing to do."

Mary Schapiro, chair of the Securities and Exchange Commission, said the SEC will propose several proxy access alternatives in May to allow shareholders to nominate director candidates to appear on management proxy statements.

The details of the alternatives are still under discussion, but the proposals likely will include a "direct access" rule and a mechanism to allow shareholders to file access bylaw proposals at companies, Schapiro said during a speech today to the Council of Institutional Investors (CII) in Washington. SEC officials are looking at whether to have a sliding scale (based on company size) for the minimum economic stake required to nominate board candidates; that percentage would be smaller at large-cap firms.

"We want to make sure that we have rational requirements–not a means to thwart investor participation," Schapiro said, prompting applause from the CII audience.

Schapiro said the SEC is committed to addressing proxy access this year, but she acknowledged that the issue "will be the most controversial issue we address this year after short-selling."

The SEC has been grappling with the thorny issue of proxy access for decades. The commission proposed a market-wide rule in 2003 that called for a two-step process for shareholders to obtain access, but then abandoned that proposal in 2005 amid opposition from companies and Bush administration officials. In 2007, the SEC proposed a 5 percent ownership requirement (and various disclosure mandates) for shareholders to file bylaw proposals to establish access procedures. Investor advocates complained that the ownership and disclosure standards were too rigorous, while many companies opposed the idea of access altogether. A divided commission ultimately adopted a rule to bar investors from filing access proposals.

Schapiro said the SEC was reviewing the 2003 and 2007 proposals, as well as reviewing what international markets have done. She said the commission specifically was looking at how Scandinavian countries have addressed the issue.

Corporate advocates are asking the Securities and Exchange Commission to hold off on barring "broker votes" from director elections until the agency can conduct a comprehensive review of the proxy voting system.

Corporate groups, such as the Business Roundtable and the Society of Corporate Secretaries & Governance Professionals, also assert that the New York Stock Exchange's rule change could disenfranchise retail investors and make it more difficult for smaller companies to meet quorum requirements.

However, various institutional investors argue that the SEC should go ahead and approve the NYSE's proposal to replace a 70-year old rule that allows brokers to vote uninstructed client shares in uncontested director elections. The rule change, which was first proposed in 2006, is slated to take effect before the 2010 proxy season.

"Shareholders have already waited far too long for this important change, and the costs of further delaying this much needed reform are greater than ever," the Council of Institutional Investors wrote in its March 19 letter.

The issue of broker votes is significant, because an estimated 70 to 80 percent of U.S. company shares are held in "street name" and managed by brokers. If the underlying beneficial owners fail to provide voting instructions within 10 days of a company meeting, then their brokers are permitted by NYSE Rule 452 to vote their shares on "routine matters," including uncontested elections; these votes are overwhelmingly cast for management nominees. During 2008, 16.5 percent of shares were voted with broker discretion, according to Broadridge Financial Solutions.

The issue has gained added importance in recent years as many large U.S. companies have adopted provisions that require board nominees to receive a majority of votes cast in uncontested elections. While most directors receive minimal opposition, discretionary broker voting can blunt the effect of "vote no" campaigns. Investor advocates point to the 2007 vote at CVS Caremark and Washington Mutual's 2008 meeting as instances where management nominees would not have obtained majority support but for broker votes.

The SEC's request for comments on the NYSE's proposed amendment to Rule 452 has generated more than 130 responses. In addition to letters from corporate law firms and trade associations, various companies sent in comments, including: Intel, ExxonMobil, ConocoPhillips, Cardinal Health, Boeing, General Motors, JPMorgan Chase, FedEx, Eli Lilly, Chevron, and Charles Schwab. Among the institutional investors and groups submitting letters in support of the new rule were the California State Teachers' Retirement System, TIAA-CREF, Hermes Equity Ownership Services, the Canadian Coalition for Good Governance, the Florida State Board of Administration, the CFA Institute Centre for Financial Market Integrity, the Ohio Public Employees Retirement System, and Trillium Asset Management.

In their letters, corporate representatives warn that the new rule could disenfranchise individual investors, who have voted less frequently since the SEC adopted "notice and access" rules to permit companies to deliver proxy materials electronically. "While issuers are taking steps to address this decline in retail voting, this is clearly the wrong time to implement new proposals that would further erode retail shareholders' voice in the proxy voting process," the Society of Corporate Secretaries wrote in its March 20 letter.

The group notes that the NYSE rule change would foreclose alternatives, such as proportional voting, whereby brokers vote uninstructed shares based on the votes from clients who provide instructions. Eleven large brokers, representing more than 45 percent of the market, have instituted proportional voting policies, according to Broadridge.

In response to these arguments, the Council of Institutional Investors noted that any decline in retail voting actually has increased the number of broker votes in director elections. "This unintended consequence . . . heightens the need for the Commission to finalize the NYSE proposed rule," the council wrote in its letter.

The council also argues that alternatives such as proportional voting are "deeply problematic," and "could further complicate" the proxy voting process and "result in abuses." The group asserts that proportional voting violates the core global governance principle of "one share, one vote," and inappropriately tries "to interpret the silence of beneficial owners."

In response to what it called "exaggerated" quorum concerns, the council said companies could address that problem by including auditor ratification resolutions (which still are considered "routine" by the NYSE) on their ballots each year.

It is unclear when the SEC will act on the NYSE proposal. As of April 2, the commission had not scheduled the topic for discussion at an open meeting.

To review the comment letters on the NYSE rule change, click here.

Shareholders have in recent years sharpened their focus on the right to call special meetings. Between 2006 and 2008, RiskMetrics Group has tracked a marked uptick in the volume of investor proposals calling for the ability to do so. Often, the resolutions seek authority for holders of 10 percent of the company's outstanding common stock to call a meeting, through thresholds have varied.

Critically, a number of such proposals have in recent years been omitted under the Securities and Exchange Commission's "no-action" process, whereby issuers can petition the commission to exclude a proposal under provisions of federal proxy rules. But far fewer proposals have been omitted in 2009 compared with 2008, setting the stage for greater movement on the issue heading into the spring annual meeting season, according to a recently released RiskMetrics report on special meetings and written consent.

RiskMetrics is currently tracking 70 such proposals, of which 55 remain pending. As of April 1, 10 have been omitted, two withdrawn, and three have been voted, including one at Becton, Dickinson, which received 60 percent support of votes cast "for" and "against," according to the resolution's proponent. That the proposals are going to vote in 2009 is noteworthy given the number of such resolutions that were omitted in 2008.

Companies also are responding to investor petitions for the right to call special meetings. In one recent case, corporate titan General Electric announced in February it would reduce the threshold to allow shareholders to call a special meeting from 40 to 25 percent. The move, which followed the filing of a proposal by shareholders John Chevedden and William Steiner, falls short of what many activists view as an ideal threshold for calling special meetings–10 percent–particularly at large capital companies. Still, GE's decision bodes well for shareholders and is in keeping with a recent trend toward enhancing shareholder rights with regard to special meetings.

Providing the right based on a reasonable ownership threshold will continue to be a focus for investors. Of the 46 percent of S&P1,500 companies allowing shareholders to call special meetings as of Jan. 1, 2009, just under one-third (29 percent) provide for the right based on ownership of 10 percent of outstanding stock. The next most prevalent threshold is 51 percent, which 24 percent of companies have set, and then 25 percent, as set by 14 percent of corporations analyzed. Another 11 percent set the threshold at 50 percent, according to RiskMetrics data.

Concerns remain whether new policies will go far enough to arrest global warming. At present, fossil fuels provide 80 percent of the world's energy demand, and dependence isn't expected to drop much by 2030 under business as usual. The International Energy Agency estimates that energy-related investments would have to rise by $10 trillion over the period, from $26 trillion to $36 trillion, to limit the atmospheric concentration of carbon dioxide to 450 parts per million. This would require deployment of new technologies at an unprecedented scale, yet still lead to 2°C of expected warming that could lead to permanent loss of coral reefs, mountain glaciers and onset of ice sheet melting that produces substantial sea level rise in the coming century.

Clear investment winners and some possible losers will emerge in the years ahead.

* Technologies and companies that promote more efficient use of all forms of energy are now in the driver's seat, and will be for years to come.

* Renewables will be the fastest-growing new energy source, especially as a global market price is attached to fossil fuels' carbon emissions.

* Nuclear power may also benefit, but still faces many challenges, including high capital costs and unresolved concerns over supply and proliferation of enriched uranium, permanent disposal of waste and local community opposition.

* Coal–as the most carbon-rich fuel–is likely the biggest loser, along with tar sands and oil shale, which have a coal-like CO2 content. The future of these industries rests largely in successful adoption of carbon capture and storage technologies.