Submitted by Ali Saribas, U.K. Research

The U.K. High Pay Commission, the independent body tasked to inquire into the escalating gap in the remuneration received by top executives and average employees across the public and private sectors in Britain, has published its much anticipated report, “Cheques With Balances: why tackling high pay is in the national interest.” 

The aim of the commission was to explore and understand the drivers behind the widening gap in pay. Opinions on the report have been mixed, some observers citing that the report did not reveal anything new and that in some cases top pay could be justified whereas others have viewed the recommendations made by the commission to be worthy and reasonable. 

According to the report, just in the past year, total executive pay at FTSE 100 companies rose on average by 49 percent, as compared with an increase of just 2.7 percent for the average employee. The 38-page report also provides some examples, such as the pay disparity at one of the U.K.'s largest companies, BP PLC. In 2011, the lead BP executive earned 63 times the amount of the average employee, whereas this multiple was 16.5 times in 1979.

The investigation concluded that excessive top pay is deeply damaging to the U.K. as a whole, and urgent action is required. Accordingly, the report includes 12 recommendations based on the principles of accountability, transparency, and fairness. Some recommendations of interest include the standardization of remuneration reports. With regard to disclosure, the High Pay Commission is also recommending that companies publish “fair pay” reports as part of their remuneration reports to build trust in pay policies. As part of these reports, companies would publish the pay ratios between the top-paid employee and company median over a period of three years to allow closer scrutiny of pay gaps. 

Another recommendation is for companies to include employee representation on remuneration committees to improve engagement and accountability. The panel found that most remuneration committees are a "closed shop,” made up largely of current and recently retired executives, which contributes to escalating pay levels and ignores the constructive role that other stakeholders can have when properly engaged. Echoing the recommendations of the U.K. Stewardship Code of 2010, the High Pay Commission is recommending that fund managers be required to disclose how they vote on remuneration matters.  

One of the more innovative recommendations is for shareholders to be provided with the opportunity to cast forward-looking advisory votes on executive remuneration. The High Pay Commission states that it has considered recommending making shareholders' advisory votes on remuneration reports binding but concluded that the preferred option would be to make the vote forward looking at this time. The commission therefore recommended that shareholders be allowed to vote remuneration arrangements for the next three years and that these arrangements include future salary increases, bonuses, and benefits. However, the panel cautions that further research should be conducted before this proposal is implemented to ensure that such a reform would encourage shareholders to vote against excessive pay packages and not increase the opaque nature of disclosure.

As you prepare for the 2012 proxy season, please join ISS for two informative webinars on December 6 and December 7 on the updates to ISS' benchmark proxy voting policies for Europe and the United States. ISS experts will also provide a preview of the key issues that institutional investors and issuers will face in the coming year. 

European Policy Updates, Tuesday, December 6, 2011, 2:30 PM GMT
Presented by ISS' Jean-Nicolas Caprasse, Head of Business, Europe; Daniel Jarman, Head of U.K. Research; Thomas von Oehsen, Head of German-Dutch Research; and Eva Chauvet, Senior Analyst, French Research. Key policy and market updates that will be covered:

• European equity compensation including new, ISS France-specific guidelines.
• U.K. update on the recently published ABI Principles of Remuneration.
• Failures of risk oversight.

U.S. Policy Updates, Wednesday, December 7, 2011, 11:00 AM EST
Presented by ISS' Dr. Martha Carter, Head of Governance Research; Carol Bowie, Head of U.S. Compensation Research; and Patrick McGurn, Special Counsel. Among the key policy updates that will be covered:

• ISS will provide a more robust view of the relationship between executive pay and company performance over a sustained time horizon.
• ISS' new policy on board responsiveness to say-on-pay votes.
• ISS has expanded the factors it will consider with regard to proxy access proposals.

To register for these webinars, please click here.

The ISS global policy updates are the culmination of an extensive consultation process that included outreach to and input from institutional investors and corporate issuers worldwide. ISS analysts will begin applying the updated policies to all publicly-traded companies with shareholder meetings on or after February 1, 2012. To learn more about the policy updates, please visit the ISS Policy Gateway.
 

ISS Corporate Services recently released a white paper, “Bridging the Pay Divide: Trends in C-Suite Pay Disparities,” which can be found by clicking here. 

This white paper examined the total direct compensation for the top five highest-paid executives at Russell 3000 companies in fiscal years 2008, 2009, and 2010. Total direct compensation is defined as the sum of pay received from: base salary, bonus, non-equity incentive plan compensation, stock awards, option awards, change in pension value and nonqualified deferred compensation earnings, and all other compensation, such as perquisites.

Here are some of the paper’s key takeaways:

• The gap between total direct compensation of the CEO and next highest paid named executive officers has closed dramatically since fiscal 2008.
• As of fiscal 2010 and where the CEO is the top paid executive, the pay gap is most pronounced at large-cap companies, where CEOs received, on average, 2.4 times the pay of the next highest paid executive officer. By comparison, the multiple is 2.1 times at Russell 3000 companies below the S&P 1500.
• Across sectors, companies in the materials sector saw the largest pay spread with an average multiple of 2.4 in fiscal 2010, while, conversely, telecommunications firms had an average multiple of just 1.9.
• The prevalence of “excessive” multiples between the CEO and next highest paid executive, defined here as three or more, declined markedly from fiscal 2008 when evidenced at more than half of all Russell 3000 companies.
• Across indices, the CEO’s share of total compensation of the top five earning officers dropped radically from fiscal 2008 to 2009, though has held steady into 2010 with CEOs claiming 42.2 percent of the total pay pie across the full Russell 3000 universe.

Submitted by Daniel Smith, Australian Research

Twelve Australian ASX 300 companies have received a first "strike" under the new "two strikes" law in Australia that allows shareholders to oust directors if a company's remuneration report receives 25 percent or more "against" votes for two consecutive years.

The controversial rule, which is part of an amendment to the Australian Corporation Act that went into effect July 1, requires companies to put a "spill" motion on the ballot of the annual general meeting at which a second strike could occur. If the spill motion passes with a simple majority, the company must hold a general meeting within 90 days at which all directors, except managing directors, stand for reelection. The legislation, which applies to any Australian-domiciled company, prohibits key management personnel or their closely related parties from voting on the remuneration report and on the spill resolution.

The 12 companies with first strike votes so far are: Bluescope, Crown, Dexus, Pacific Brands, Watpac, UGL, GUD, Austock, Tassal Group, Sirtex Medical, Perpetual, and Globe. 

The two strikes rule has increased the focus on executive pay in the Australian market, but has otherwise received mixed reviews, with some stakeholders concerned that shareholders could use the rule as a way of ousting directors instead of focusing on remuneration. They fear it could dilute the existing feedback mechanism without actually curbing any of the pay excesses.

An advisory vote on remuneration packages has been required in Australia since 2005.

Earlier today, ISS released 2012 updates to its U.S., Canadian, European, and international benchmark proxy voting guidelines.

These global updates are the culmination of an extensive consultation process that included outreach to and input from institutional investors and corporate issuers worldwide. ISS analysts will begin applying the updated policies to all publicly-traded companies with shareholder meetings on or after February 1, 2012. To learn more about the policy updates, please visit the ISS Policy Gateway.

To ensure its voting policies take into consideration the perspectives of the corporate governance community and the views of its institutional clients, ISS gathers broad input each year from institutional investors, issuers, and other market constituents through policy surveys, issue-specific roundtables, and an open comment period. ISS is the only corporate governance and proxy voting advisor that undertakes such a broad, transparent, and inclusive process to gather, assess, and incorporate market feedback into its institutional proxy voting policies, and ISS remains committed to this approach.

"ISS firmly believes that incorporating multiple views on corporate governance issues is critical for effective policy formulation," said Martha Carter, ISS' Head of Global Research. "It was helpful to hear from both investors and issuers as we developed a more robust pay-for-performance policy and evaluated how we will assess board responsiveness to say-on-pay votes."

Retail shareholder activist Ken Steiner has filed a low-threshold proxy access proposal at Textron, according to the U.S. Proxy Exchange (USPX), a group that represents retail investors. 

Steiner filed his latest proposal on Nov. 15 after submitting a similar resolution at MEMC Electronic Materials on Nov. 11, said Glyn Holton, USPX’s executive director. The proposals are the first 2012 access resolutions to be made public and suggest that U.S. companies may see more proposals on this topic next season than many governance observers have expected.  

Steiner's resolutions are based on a model proposal that USPX members have drafted as a more permissive alternative to the SEC's universal access rule (Rule 14a-11), which would have required investor groups to hold a 3 percent stake for at least three years, and imposed a 25 percent cap on the board seats that could be contested by access nominees. That rule was overturned by a federal appeals court in July and the SEC appears unlikely to try to revive that rule in the next year. While some institutional investors have expressed support for Rule 14a-11’s thresholds, the USPX and other retail activists have argued that those hurdles would be too high and would bar small shareowners from nominating board candidates.

The USPX model proposal urges a company's board to adopt a proxy access bylaw that would permit director nominees from: any party of one or more shareowners that has held continuously, for two years, 1 percent of the company’s securities eligible to vote for the election of directors, and/or any party of shareowners of whom 100 or more satisfy SEC Rule 14a-8(b) eligibility requirements (i.e., those who hold at least a $2,000 stake for one year). Any such party may make one nomination or, if greater, a number of nominations equal to 12 percent of the current number of board members, rounding down.

In his Textron resolution, Steiner points to pay concerns, such as cash-based long-term compensation, which does “nothing to tie executive performance with long-term shareholder equity value,” and a potential $39 million exit payout to the CEO, Steiner said, according to Holton.

Holton said USPX members plan to file at least four proposals. It also appears likely that labor investors or public pension funds will submit a handful of resolutions, but those proposals likely will be based on the standards in Rule 14a-11. 

All of these proxy access proposals likely will face corporate no-action challenges. While the SEC has repealed a 2007 rule that allowed companies to exclude all access-related shareholder proposals, issuers still can raise other substantive objections (such as impermissibly vague or misleading, or contrary to state or federal law), or seek to challenge a proponent’s evidence of ownership.  

Many U.S. institutional investors still are formulating their voting policies on 2012 proxy access resolutions. While many institutions have expressed support in the past for the concept of proxy access, it remains to be seen how many non-activist institutions actually will vote for shareholder proposals on this topic, especially if those resolutions call for lower ownership thresholds than in Rule 14a-11.
 

A retail shareholder activist has filed a proxy access proposal at MEMC Electronic Materials, according to the U.S. Proxy Exchange, a group that represents retail investors. The proposal is the first 2012 proxy access resolution to be made public and suggests that U.S. companies may see more access proposals next season than governance observers have expected.  

The resolution was filed Nov. 11 by long-time activist Ken Steiner, said Glyn Holton, executive director of the group. Steiner's measure is based on a model proposal that U.S. Proxy Exchange members developed over the past month as a more permissive alternative to the SEC's universal access rule, which would have required investor groups to hold a 3 percent stake for at least three years. While some institutional investors have expressed support for these thresholds, retail activists have argued that those hurdles would be too high and would disenfranchise small shareowners. 

The U.S. Proxy Exchange's model proposal urges a company's board to adopt a proxy access bylaw that would permit director nominees from: any party of one or more shareowners that has held continuously, for two years, 1 percent of the company’s securities eligible to vote for the election of directors, and/or any party of shareowners of whom 100 or more satisfy SEC Rule 14a-8(b) eligibility requirements (i.e., those who hold at least a $2,000 stake for one year). Any such party may make one nomination or, if greater, a number of nominations equal to 12 percent of the current number of board members, rounding down.

Earlier today, ISS named Georgina Marshall as its new Head of European Research. She is currently Regional Head of Corporate Governance for Aviva Investors, a global asset manager with a track record of leading corporate governance and responsible investment practices. Ms. Marshall will assume her new ISS role in January 2012 and will be based in London.

“The U.K. and Continental European markets have played an important role in the development of global corporate governance standards and Aviva Investors has been one of the institutions at the forefront,” Gary Retelny, President of ISS, said in a press release. “Georgina has a proven track record of successfully leading corporate governance initiatives, in establishing best practices and in working with fund managers to integrate governance into the investment management process. We are pleased to have someone of Georgina’s caliber at the helm of our European policy development and governance research.”

On behalf of its institutional clients, ISS performs research and issues proxy vote recommendations on more than 10,000 European companies. Reporting to Dr. Martha Carter, ISS’ Head of Global Research, Ms. Marshall will lead the research teams that are based in London, Brussels, and Paris and cover the U.K. and Continental Europe. She will also have a role on ISS’ Global Policy Board and will oversee ISS’ issuer engagement activities.

In addition to her 10-year tenure at Aviva Investors, Ms. Marshall held IT and Finance roles at Swiss Re and at Mercantile and General Re Insurance. She is a Chartered Accountant (ICAEW), and member of ICAEW Faculty of Finance and Management. She graduated with honors from the University of Exeter.

Earlier today, the U.S. Proxy Exchange, which represents retail shareholder activists, released a model proxy access proposal. The group argues that investors should support shareholder resolutions that seek more permissive access standards than the 3 percent stake for three years that the SEC's vacated Rule 14a-11 would have required. 

The model non-binding proposal would urge a company's board to adopt a proxy access bylaw with these provisions: 

• The company proxy statement, form of proxy, and voting instruction forms, shall include nominees of: any party of one or more shareowners that has held continuously, for two years, 1 percent of the company’s securities eligible to vote for the election of directors, and/or any party of shareowners of whom 100 or more satisfy SEC Rule 14a-8(b) eligibility requirements (i.e, those who hold at least a $2,000 stake for one year).
• Any such party may make one nomination or, if greater, a number of nominations equal to 12 percent of the current number of board members, rounding down.
• For any board election, no shareowner may be a member of more than one such nominating party. Board members, named executives under Regulation S-K, and Rule 13D filers seeking a change in control, may not be a member of any such party.
• All members of any access-nominating group must affirm in writing that they are not aware, and have no reason to suspect, that any member of their party has an explicit or implicit, direct or indirect, agreement or understanding either to nominate or regarding the nature of any nomination, with anyone not a member of their party.

While the U.S. Proxy Exchange asserts that proxy access should be a universal right of shareowners, it recognizes that not all institutional investors agree, and thus the group is encouraging proponents to highlight a company's governance and/or performance problems in the preamble of their resolutions. "In the current environment, proxy access proposals are more likely to receive majority votes at corporations with significant governance or performance issues identified in the proposal’s preamble," the group said.  

While many large issuers have improved their governance practices in recent years, the practices at newly public companies--even those that aren’t controlled--have remained mostly unchanged, according to a recent report from the law firm of Davis Polk & Wardwell.

The law firm surveyed the governance provisions of the 50 largest new companies (excluding controlled firms, real estate investment trusts, trusts, and blank check companies) that had initial public offerings between Jan. 1, 2009, and Aug. 31, 2011, and compared those findings to a 2009 survey of IPO companies. “In both surveys, there were approximately similar results for the existence of classified boards, voting standards in uncontested board elections and the percentage of audit committee independence at the time of the IPO,” the report.

In the most recent survey, 78 percent of companies had a classified board, 94 percent had a plurality voting standard, and 74 percent required supermajority shareholder approval to amend bylaws (or charters) at the time of the public offering. Notably, just 34 percent of new firms this year’s survey had separated the role of CEO and chairman, as compared with 52 percent in the 2009 survey.

However, the Davis Polk report found “some trends, however small, towards more shareholder–friendly provisions,” such as:

• This year’s survey showed an average director independence of 74 percent, up from 66 percent in the 2009 survey. Also, of the companies that separate the role of CEO and chairman, 65 percent of those surveyed in 2011 had an independent chairman versus 19 percent in the 2009 survey.

• More companies (32 percent) had more than one financial expert on their audit committee, up from 14 percent in the 2009 survey.

• No companies had a poison pill in this year’s survey, whereas 6 percent did so in the 2009 survey.

In addition, the report found that some new issuers are adopting charter or bylaw provisions to require certain shareholder litigation against the company to be brought exclusively in the courts of Delaware, the company’s state of incorporation. Seven firms with IPOs in 2010 or this year adopted exclusive forum provisions.

Regis Corp. received more than 71 percent opposition to its pay practices at its Oct. 27 annual meeting, which is the greatest dissent seen so far during an U.S. advisory vote on compensation, according to ISS data.

The S&P 400 mid-cap company received just 28.9 percent support (based on “for” and “against” votes), which eclipses the 33.7 percent vote (or 29.8 percent if abstentions are counted) at Cincinnati Bell. Regis is the 41st U.S. issuer to report a failed pay vote this year, according to ISS data. (This total doesn't include two other issuers where the advisory vote would have failed if abstentions had been included to determine passage.)     

“Although this vote is advisory, the Board takes the results of this vote seriously,” Regis said in a regulatory filing. “The Board and its Compensation Committee are committed to the continuous evaluation of our compensation programs and to considering appropriate adjustments to those programs in order to reflect progress made toward the implementation of the Company’s operating initiatives as well as input from shareholders.”

The dissent at Regis occurred during a proxy fight waged by Starboard Value LP and affiliates, which held a 5.2 percent stake. Starboard nominated three candidates to the company’s seven-member board and all three dissidents were elected.

Minnesota-based Regis, which operates hair salons, has underperformed its industry peers in stock performance and operational performance over the past three fiscal years. Starboard argued that the company is deeply undervalued and opportunities exist to improve both its operating and stock price performance.

The investor dissent over pay at Regis appears to be a reaction to the significant payments to executives that were not tied to strict performance conditions. According to the ISS report on the company, the named executives, including the CEO, all received cash incentive payouts at a time of sustained operational and stock price underperformance pursuant to an annual incentive program that appears to be more discretionary in nature than performance-based when the adjustments to metrics are considered. The non-performance-based elements of pay, including perquisites and tax gross-ups, increased significantly year-over-year and the company did not provide shareholders with appropriate disclosure or rationale, ISS said. Additionally, a new employment agreement with the CEO provides for significant non-performance-based payouts, above-median base pay that also exceeds the $1 million tax deductibility threshold, problematic severance arrangements, and excessive post-employment benefits, the ISS report said. 

Today is the final day to comment on ISS' draft benchmark proxy voting policies for the 2012 proxy season. A critical component of ISS' annual policy formulation process, this comment period allows institutional investors, corporate issuers, and governance market participants to provide feedback on ISS' policy updates while they are still in draft stage. ISS is seeking comments on both its U.S. and international policies.

To ensure its voting policies reflect the perspectives of the corporate governance community and represent the collective voice of its institutional clients, ISS gathers broad input each year from institutional clients and market constituents through policy surveys, issue-specific roundtables, and this unique open comment period. During this year's policy survey, more than 300 respondents weighed in on issues that included executive compensation, board independence, engagement triggers, and social and environmental issues. The full results from the survey are posted on the ISS Policy Gateway.

The proposed policy changes include a more robust pay-for-performance policy for the U.S. and Canada with a longer-term focus on trends in total CEO compensation and shareholder return. The proposed policies also address the responsiveness of boards to significant shareholder opposition during say-on-pay votes and to investor preferences during say-on-pay frequency votes.

ISS also is seeking comment on draft policy changes on these topics:

• Proxy Access Proposals (U.S.)
• Election of Censors (France)
• Board Independence (Brazil)
• Equity Plans Related to Section 162(m) (U.S.)
• Equity-Based Compensation (France)
• Increase in Director Compensation Ceiling Proposals (Japan)
• Hydraulic Fracturing Proposals (U.S.)
• Political Contribution Proposals (U.S.)

ISS will release its final 2012 U.S. and international policy updates during the week of Nov. 14 and its Global Policy Summary and Concise Guidelines in December. To participate in ISS' comment period and learn more about its policy formulation process, please visit the ISS Policy Gateway.

While no investors have publicly announced the filing of a proxy access proposal so far, governance observers expect that activists will submit at least a half dozen resolutions on this topic in 2012.

Many observers expect to see proposals that are modeled on the SEC’s universal access rule, Rule 14a-11. The rule, which was invalidated by a federal court, would have required investor groups to hold at least a 3 percent stake for three years to nominate board candidates, and would have imposed a 25 percent cap on the number of director seats available to access nominees. However, some retail activists have expressed interest in filing access proposals with lower thresholds that would make it easier for smaller shareholders to participate.
 
During ISS’ comment period on its draft voting policies, investors have offered varying views on the types of access provisions that they would support. ISS is seeking comments from all market participants on its approach to proxy access, pay for performance, and other key U.S. and international governance issues.

Retail shareholder activist James McRitchie supports lower thresholds for access and has organized a discussion group through U.S. Proxy Exchange, a shareholder advocacy group, to develop a model resolution.

“We are leaning toward thresholds of 1 percent held for at least one year or 50-100 shareowners who have all held $2,000 of stock for a year to be able to nominate up to 20 percent of the board,” McRitchie wrote in his comments to ISS. “We would allow multiple non-overlapping groups to make such nominations as long as they are not coordinating efforts, are not 13D filers and are not seeking control as defined in Regulation 405. The lower range of 50 shareowners would apply in the case of corporations with 1,000 shareowners or less.”

Donna Anderson, a global corporate governance analyst with T. Rowe Price, noted that her firm has not yet established its 2012 voting policies on access proposals, but agrees that certain restrictions on access are reasonable and necessary. “Such restrictions, in our view, should include a reasonable minimum ownership standard, a maximum number of seats, and an exclusion on filers seeking a change in control. We are less inclined to believe that a lengthy holding period is necessary,” she said. She added that the provisions in the SEC Rule 14a-11 are “a good general reflection of institutional shareholders' expectations with regard to such limits and requirements.”

Anderson said T. Rowe Price also believes that “proponents should have a strong rationale for targeting a particular company,” given the potential disruption that an access provision could cause. “In this regard, proponents should be required to demonstrate a long-term commitment to creating shareholder value and not have a personal agenda or ‘axe to grind’ with the company,” she said. 

However, Runa Urheim, a senior corporate governance analyst with Norges Bank Investment Management (NBIM), argued that access proposals “should be supported regardless of the governance profile and financial performance of the company,” and that those resolutions should be used “to establish a de facto market standard.” 

NBIM also favors lower thresholds than set forth in Rule 14a-11. “Our preferences are thresholds of one year and 1 percent, and 25 percent of the board seats. All shareholder-nominated candidates should appear on the ballot,” Urheim wrote in comments to ISS. 

And it’s not too late for other investors and issuers to express their views on proxy access and other key governance issues; the ISS comment period closes on Nov. 7. To submit a comment, please click here.
 

The American Bar Association's (ABA) Corporate Laws Committee has declined a request from the Council of Institutional Investors (CII) to revise the Model Business Corporation Act (MBCA) to make majority voting the default legal standard for uncontested director elections.

In an Oct. 25 letter, A. Gilchrist Sparks, chair of the Corporate Laws Committee of the ABA's Business Law Section, said the panel considered the investor group's request but decided that a new review of the MBCA is not warranted "at this time." The MBCA is the basis for the corporate laws of most states besides Delaware. Section 7.28(a) of the MBCA now sets plurality voting as the default standard for director elections unless a company's articles of incorporation call for a different standard.

Sparks pointed out that a significant number of companies have adopted majority threshold provisions since the MBCA was amended in 2006 to encourage issuers to adopt bylaws on this topic. He said the committee "believes that a cautious approach to making changes to the MBCA is prudent," and that the results of the 2006 amendments and related state law changes should continue to be monitored before additional revisions to the MBCA are considered.

While about 70 percent of large-cap U.S. companies have adopted majority threshold provisions and director resignation policies, most mid- and small-cap issuers have not. The CII request to the ABA (along with a similar letter to the Delaware State Bar Association) is among the efforts by majority voting advocates to spur smaller firms to adopt this reform. In May, the United Brotherhood of Carpenters petitioned the SEC to abolish "withhold" votes in an effort to prod more issuers to adopt majority voting bylaws.
 

More than half of the largest 100 U.S. public companies now disclose their direct political spending and have adopted board oversight mechanisms, according to a new report from the Center for Public Accountability (CPA), a Washington-based group that coordinates shareholder proposals that seek more disclosure.

On Friday, CPA released its report and a new index that ranks companies based on their political spending disclosure on their public Web sites. The group prepared the index with the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania. CPA said it plans to update the index annually and will expand it next year to cover the S&P 500.

The index likely will be used as a checklist for shareholder proponents as they file proposals for the spring 2012 proxy season. CPA has organized investor campaigns on this issue since 2003; at that time, very few companies publicly disclosed details about their political activities and policies.

This issue has received more investor and media attention since the U.S. Supreme Court struck down restrictions on indirect political spending by companies in January 2010.  During the spring 2011 proxy season, investors filed 79 proposals (a 40 percent increase from 2010) that related to political activities, while the CPA-coordinated resolutions averaged 33.8 percent support, up from 28.4 percent the previous year, according to ISS data. 

Corporate political spending likely will get even more attention during 2012, a presidential election year. Both Republicans and Democrats have formed independent groups that will be able to influence federal elections without disclosing their donors. 

“As avenues for corporate political money proliferate, the need for greater transparency and accountability on the part of companies increases,” CPA argues in its report. “Companies have a duty to shareholders to ensure that corporate funds are used in ways that advance long-term company interests and enhance shareholder value.” 

In recognition of the growing concern over the risk of corporate political activities, ISS has proposed to revise its benchmark voting policies and would generally recommend “for” resolutions that seek better disclosure, instead of the current “case by case” approach. (For more details on this and other proposed policy changes, please click here.)