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ALBANY, N.Y. (AP) - New York City's public pension funds have pushed this year for independent board chairmen and chairwomen at several U.S. corporations, winning the shareholder vote at Netflix and obtaining an agreement at Wellpoint.
Arguing that chief executives shouldn't also chair the boards responsible for CEO oversight, the funds proposed similar measures at Aetna, Johnson Controls, Mylan, Urban Outfitters and JPMorgan Chase, gathering shareholder support ranging from 30 percent to 42 percent despite company opposition.
Assistant City Comptroller Michael Garland says having top corporate positions held by one individual is an inherent conflict of interest.
"The whole purpose of the board is to exercise independent oversight over management so that role is potentially compromised. We're the only main industrialized nation where combined chair and CEO is the norm," he said.
The five pension funds for city workers, with $137 billion in assets, submitted shareholder proposals at 57 companies, including provisions to "claw back" executive bonuses for misconduct, requirements of overseas suppliers to report compliance with worker rights standards and a request of Exxon Mobil to report data on its efforts to protect the public and environment from hydraulic fracturing drilling operations.
At Wellpoint, the Indianapolis-based health care company, the fund withdrew its proposal for independent board leaders after the company agreed to have an independent chair for at least two years. But so far, the fund has seen nothing from Netflix in responding to the "lopsided" vote, Garland said.
At the Los Gatos, Calif.-based provider of movies and other content for almost 38 million subscribers, the proposal got 73.4 percent support in June though co-founder and CEO Reed Hastings remains chairman. "Our board regularly reviews its corporate governance profile and the measures it deems appropriate to best maximize long-term value for shareholders," company spokesman Jonathan Friedland said Thursday.
In its proxy statement before the June shareholder meeting, Netflix recommended voting against the proposal. "While the board reassesses maintaining the combined role from time to time, it currently believes that the chief executive officer is best situated to serve as chairman because he is the director most familiar with the company's business and industry and is therefore best able to identify the strategic priorities to be discussed by the board."
The five pension funds have varying boards with City Comptroller John Liu a trustee and adviser to all of them.
"As long-term shareowners, we rely on directors to put our interests ahead of management," Liu said. "Captive directors who ignore majority shareowner support for fundamental reforms, such as those at Netflix, do so at their own peril."
The related push at JPMorgan chase, where Jamie Dimon made headlines in remaining both CEO and board chair of the bank, got 32 percent shareholder support, down from 40 percent a year earlier.
Garland notes that shareholder measures are advisory and management nearly always opposes them.
"The onus is on the board to act," he said. "Unfortunately, there are repeated examples where boards repeatedly ignore majority votes..."
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