Corporate Governance

Surveys and Trends

On this page

• TI Calls on Leading Oil and Gas Companies to Increase Revenue Transparency
• Corporate Governance Structures in Australian Mid-Size Companies Declining
• Tracking Changes in Global Companies' Anti-Corruption Programs
• Problems Continue For Hispanics in US Corporate Leadership
• UK Study Links Governance to Stock Performance
• ISS 2007 Board Practices, Board Pay Report
• Reforming Asia's Proxy Voting Systems
• Latin American Banks: Ethics, Governance, CSR
• 2006 Edelman Annual Trust Barometer
• ISS on the 2006 Proxy Season: An Issue-by-Issue Review
• CalPERS Focus List on Poor Corporate Governance
• Singapore Leads in Asian Corporate Governance Study
• OECD Highlights Need for Corporate Governance Reforms in China
  
  
  

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TI Calls on Leading Oil and Gas Companies to Increase Revenue Transparency

New report shows companies should provide greater accountability

A majority of leading oil and gas companies are far from transparent when it comes to the payments they make to resource-rich countries, leaving the door open to corruption and hampering efforts to fight poverty, according to a report published today by Transparency International (TI).

“The tragic paradox, that many resource-rich countries remain poor, stems from a lack of data on oil and gas revenues and how they are managed. Companies must do more to increase transparency,” said Huguette Labelle, Chair of TI.

Revenue transparency report findings

The 2008 Report on Revenue Transparency of Oil and Gas Companies evaluates 42 leading international and national oil and gas companies operating in 21 countries, based on the transparency of their reporting, particularly on payments made to governments for resource extraction rights.

The report, based on data made publicly available by companies, categorises companies into high, middle and low performers. Only a third of companies evaluated in the report are considered high performers.

To see the full table with a more detailed explanation of the criteria, download the file here.

Oil and gas transparency fights poverty

Today, sixty percent of the world’s poorest people live in resource-rich countries. Most constitutions grant citizens ultimate ownership of their country’s natural resources. Yet much of the data on what companies pay for the right to exploit these resources and how this money is spent by host governments remains unpublished and beyond public scrutiny.

When companies and governments are fully transparent, citizens, journalists, civil society, researchers and investigators can track revenue flows, holding public officials to account and discouraging corruption. With oil prices at record highs and industry revenues in OPEC countries alone expected to reach nearly US $1 trillion in 2008, the question of transparency has never been more critical.

“Oil and gas wealth, if properly managed, should support better services and infrastructure. It should lead to a better quality of life for all citizens. It is the duty of civil society to work with companies and governments to unlock this potential,” said Labelle.

A call to companies

Companies need to act quickly to introduce proactive reporting, rather than wait for legislation. In identifying high-performers, TI’s report shows that revenue reporting on a country-by-country basis, which is identified as best practice, is possible. As the companies with best results show, transparency and profitability are not mutually exclusive. To the contrary, greater transparency can enhance confidence in the financial markets and with stakeholders. “Revenue transparency is a win-win equation,” said Cobus de Swardt, Managing Director of TI. “The benefits to all, especially the world’s poorest, can be enormous.”

Companies: just one piece of the puzzle

“We hope that this report helps motivate companies to improve their revenue transparency and that they understand that civil society stands ready as a constructive partner in this process,” added de Swardt. “And when we update the report data we look forward to seeing not only improved scores, but greater company engagement in our work. This is an issue that can only be tackled collaboratively.”

Analysing company performance is just one piece of the puzzle. Although the private sector must increase revenue transparency, governments of host countries are ultimately accountable for the management of their resources. They must therefore lead the drive for a more equitable exploitation of oil and gas wealth, by enacting, promoting and enforcing regulation. Future reports by Transparency International will look at the role of resource-rich country governments as well as those governments home to major extractive companies.

Report recommendations

The 2008 Report on Revenue Transparency of Oil and Gas Companies makes four key recommendations:

• Companies should proactively report revenues paid to governments on a country-by-country basis;
  
  
• Governments, stock exchanges and regulatory agencies should urgently consider mandatory reporting for companies operating in-country and abroad;
  
  
• Governments from oil and gas producing countries should introduce legislation mandating revenue transparency by all companies operating in their territories;
  
  
• Regulatory agencies and companies should agree to publish information in a uniform and accessible format, one that facilitates both comprehension and comparability.

Posted 4/28/08

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Report Finds Serious Decline of Corporate Governance Structures in Australian Mid-Size Companies

Board independence and the existence of proper governance committees have fallen since 2006.

A second annual report on the state of corporate governance in Australian mid-sized companies has concluded “disappointing” results.  The report, “Mid-Cap Corporate Governance Report 2007,” was published by BDO Kendalls, a worldwide network of accounting firms based in Australia, and researched by the University of Newcastle.  Out of 150 mid-sized Australian listed companies, there was a decrease in both the number of five–star rated (i.e. outstanding) companies and 4.5 star rated (i.e excellent) companies since 2006, and there was an increase in both the number of one–star rated (ie. lacking in most key areas) companies and two–star rated (i.e lacking in some key areas) companies.  According to the report, on a range of criteria including audit committee existence, remuneration committee existence, nomination committee existence, and share trading policy, "mid–cap companies appear to have gone backwards."

Overall Results

Only two companies out of 150 received a five-star rating - Tasmanian Perpetual and Life Therapeutics.  These two companies met all of the outlined criteria.  In 2006, the number of five-star companies was higher; four received this rating.

In contrast, 13 companies received a one-star rating, an increase from 10 in 2006.  The corporate governance structures in these companies were considerably lacking in most criteria.

Lowest Ranked Companies

Research Model

The companies were evaluated on a number of important criteria:

Board of Directors:

Most desirable companies have:
-a board with the majority of independent directors;
-an independent chairperson; and
-met at least 6 times annually.

Least desirable companies have:
-a board with no independent directors;
-the CEO as chairperson; and
-met less than 6 times annually.

Overall, there was little change between 2006 and 2007 in the independence of the Board of Directors. Twenty-five percent of companies had mostly independent members in 2007, which is slightly lower than 28 percent in 2006.

Audit Committee:

Most desirable companies have:
-an audit committee with all the members, including the chair, independent;
-a chairperson, who is not the chair of the main board;
-at least one member with professional or educational accounting qualifications;
-at least 3 members; and
-met at least 4 times annually.

Least desirable company does not have an audit committee.

Overall, the number of companies that did not have an audit committee increased significantly.  In 2006, only five companies did not have a committee and in 2007, 15 did not have a committee.

Remuneration Committee:

Most desirable companies have:
-all the members, including the chairperson, independent;
-at least 3 members.

Least desirable company does not have a remuneration committee.

Overall, the results are mixed.  The number of companies with a committee fell from 122 in 2006 to 106 in 2007, but there was an improved level of independence on the remuneration committees.

Nomination Committee:

Most desirable companies have:
-all the members, including the chairperson, independent;
-at least 3 members.

Least desirable company does not have a nomination committee.

Overall, only 15.5 percent of the committees were constituted totally of independent members, and more than half (56.9%) did not have a majority of independent members.  Additionally, nomination committee existence appears to have deteriorated significantly since the 2006, from 50 percent to 38.7 percent.

Weightings were also placed according to companies’ external auditor independence and their codes of conduct.

Overall, with respect to non–audit fees paid to the statutory auditor the findings are slightly better than the findings in the 2006.  128 companies had a code of conduct, but it is troubling why the remaining 22 companies would deem it apparently unnecessary to have a documented code of conduct. 129 companies had reasonable policies on risk management which were identical to the number in the 2006.

For a complete explanation of the rating system and a full chart of the 150 listed companies, please read the full report here.

Posted 11/30/07

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Tracking Changes in Global Companies’ Anti-Corruption Programs

The U.S. Conference Board recently released a report based on a 2006 survey of international companies, with significant global operations but mostly headquartered in the US, asking similar questions which were posed in a 2000 survey. Notable changes are visible in the areas of Management Commitment, Company Implementation of Policy Statements, Training and Discussion, Whistleblowing and Helplines, and Follow-Up. The report also highlights what companies see as their key challenges and best practices in creating highly-effective anti-corruption programs.

Overall, the author of the report, Ronald Berenbeim, principle researcher and director of the The Conference Board's Working Group on Global Business Conduct, found that companies are becoming more comfortable with implementing anti-corruption programs and more efficient at implementing them. He characterized the last six years as a convergence of methods between the compliance and principle-based systems, which is a shift from a heavier focus on compliance. In addition, more countries are signing onto international conventions and adopting their standards. The challenges lie in tailoring these larger principles to individual company programs.

Management Commitment

• Companies with formal programs were more likely to have senior executives from auditing, contract and procurement, legal, public affairs, security, and social responsibility/citizenship at both the corporate and local levels, rather than just the corporate office.
  
  
• Fifty-eight percent of the company respondents had legal or compliance functions. Legal obligation was one of the largest factors in the creation of anti-corruption programs.
  
  
• Eleven respondents were chief ethics officers and 42 others had the word “ethics” in their title, which indicates many programs are going beyond just compliance measures.
  
  
• Public affairs and social responsibility specialists were more likely to assist legal personnel, which suggests a stronger commitment to corporate citizenship responsibility.
  
  
• Seventy-six percent of respondents report to a C-suite executive, board member and/or committee. Anti-corruption programs are being subject to very high levels of review.
  
  
• The chief legal officer was much more likely to be involved in all phases of the program - development involvement rose from 47 percent in 2000 to 76 percent in 2006, implementation was up from 55 to 66 percent and monitoring and oversight increased from 42 to 64 percent.
  
  
• The number one motivation for creating effective anti-corruption programs is senior management leadership and personal convictions (33%) and second, bribe payments are illegal under home country laws (27%).
  
  

Implementation of Policy Statements

• Of the companies with formal anti-corruption programs, 90 percent had a written anti-corruption statement, while only 50 percent of the non-program group had one.
  
  
• An ideal statement would have a zero-tolerance for bribery, and the offender would be terminated. The region most likely to have such a statement is Europe (60% of European respondents), while 46 percent of U.S. companies had them, and Asia Pacific companies were the least likely to have them (27% of Asia Pacific respondents).
  
  
• In 2006, 68 percent of respondents had their company statement posted on the Internet; while in 2000 only 29 percent had theirs posted.
  
  
• In 2006, 97 percent of those companies that had a statement used the same one worldwide; while in 2000, only 79 percent used the same rhetoric in all locations.
  
  
• Respondents in 2006 were somewhat more likely to have policies on facilitation payments than in 2000.
  
  
• Thirty percent of the respondents said in the last three years, company policies on facilitation payments to outside contractors or specialist advisors have become more restrictive.
  
  

Training and Discussion

• Compared to 2000, respondents in 2006 were more likely to be engaged in training and discussion; however, eight percent of respondent companies still do not use them at all. Overall, companies are more expected to establish a culture of compliance than was the case in 2000.
  
  
• Substantially more than half of the 2006 respondents believe face-to-face case study interchange can be useful. More than one-fifth of the participants do not even have these kinds of sessions.
  
  

Whistleblowing and Helplines

• Thirty-nine percent of the 2006 respondents said these program elements were either “effective” or “highly effective,” while only 18 percent of the 2000 respondents said the same.
  
  
• Whistleblowing elements, compared with other measures in a program, are rated the lowest in terms of effectiveness, with most of the opposition coming from government agencies.
  
  

Follow-Up

• After the need for a detailed policy statement, investigative follow-up is considered the most important measure for an anti-corruption program.
  
  
• Reporting and disclosure activities are viewed as least important. Fourty-one percent of the 2006 respondents believed that an annual requirement that country managers must report questionable practices could be effective or highly effective, which is a 21 percent increase from 2000.
  
  
• Only 17 percent of the respondents said social audit disclosure of questionable practices was important.
  
  
• There has been a significant rise in sustainability reports, but only 18 percent have policies for bribery/corruption or thoroughly describe anti-corruption practices.
  
  

Challenges and Lessons

The main challenges faced by respondent companies were mainly cultural. Seventy-four percent said adherence to core business principles in diverse cultural environments was a challenge, while the next most frequently cited problem was obtaining contractor compliance with anti-corruption policies. On the other hands, many companies have worked hard on their policy statements, which have become more detailed and precise. Sixty-four percent of respondents rate policy statements as effective or highly effective. Most companies believe their own company practices are the most effective at curbing corruption and have little interest in cooperating or networking with the government, NGOs or other companies.

To view the report in full, click here for the .pdf version.

Posted 8/7/07

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Problems Continue For Hispanics in US Corporate Leadership

Despite the fact that the Hispanic population in the United States is continually on the rise, it is still severely underrepresented in corporate leadership positions. This study, released by the Hispanic Association on Corporate Responsibility on June 20, 2007, analyzes the current trends.

Hispanics currently represent 14% of the US population and hold a purchasing power of $863 billion. This study shows that most Fortune 500 companies are grossly underutilizing the potential of this sector of the population. 

Key Findings

• Although there has been a 26% increase, from 2003 to 2006, in the number of Fortune 500 board seats held by Hispanics, it still only represents 3.1% of the total number of seats available. 
  
  
• The number of Hispanics holding executive officer positions is only 1%. 
  
  
• Forty-eight of the Fortune 500 companies have had a constant Hispanic presence for over 10 years; but 71% have no representation at all.
  
  

Worse For Women

• The number of Fortune 500 directorships held by Hispanic women is less than 1%.  Only one foreign-born Hispanic woman holds a director position.
  
  
• From 2003-2006, only 10 Hispanic women have joined Fortune 500 boards. 
  
  

At this current growth rate, it would take more than 100 years to achieve true Hispanic parity, the survey reported.

Challenges to Hispanic Representation on Corporate Boards

• There is a narrow pipeline for Hispanic executives
• Hispanic educational attainment is comparatively low
• Negative stereotypes and preconceptions still exist for Latinos
  
  

Opportunities Still Exist

• Hispanics can build stronger alliances within their communities.  Although Hispanics are underrepresented, Latinos serve on companies with higher average revenues, which makes them more significant in the business world.
• Nomination committees and search firms need to expand their net.
  
  

The Hispanic Association on Corporate Responsibility fights to gain greater representation in Corporate America. It does this by focusing on four areas of corporate responsibility and market reciprocity – employment, procurement, philanthropy, and governance.

Posted 7/2/07

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UK Study Shows Link Between Corporate Governance,
Board Composition, and Stock Performance

A UK study by the Association of British Insurers (ABI) has found a strong link between governance standards and stock performance. The study tracked the share price performance and board composition of the 14 companies in the FTSE All-Share Index that had been issued two or more “red tops,” (the most serious corporate governance breaches in the UK) over the last three years. Of these 14, 11 had underperformed in their sector, nine had no independent non-executive directors and three had only one.

According to ABI director of investment affairs Peter Montagnon, "Our study points to a strong link between governance standards and share price performance. It shows that a persistent imbalance in board composition tends to go hand-in-hand with a reduced ability to create value," he added.

Key findings
In the last three years (2004-2006), fourteen FTSE All Share companies have received two or more red-tops related to serious breaches of the UK’s Combined Code on Corporate Governance (the British Financial Services Authoritie's regulations on corporate governance).

Comparative performance across their FTSE sector over the three year period shows:

• Eleven out of these fourteen companies under-performed their sector in share price performance.  Four underperformed by more than 50 per cent.  The worst performer lagged its peers by 62 per cent.
  
  

Comparative performance across the FTSE All Share index over the three year period shows:

• Nine out of these fourteen companies under-performed the FTSE All Share.  Four underperformed by more than 50 per cent.  The highest level of under-performance was 70 per cent. 
  
  

Board composition of companies incurring two or more red tops
The overall balance between executives, independent, and non-independent non-executive directors is important.  The Combined Code recommends that for FTSE 350 companies, half of the Board (excluding the Chairman) should comprise independent non-executives.  Outside the FTSE 350, companies are expected to have at least two independent Non-Executive Directors. 

The fourteen companies receiving two or more red tops showed a preponderance of executives on the board.  Most of them are smaller companies outside the FTSE350 and therefore not subject to the Code requirement that half the board be made up of independent directors.  However, of these fourteen companies:

• 12 companies did not meet the requirement for smaller companies that they should have at least two independent directors.
  
  
• Nine had no independent non-executive directors and three had only one.

Posted 12/16/07

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Institutional Shareholder Services Releases 2007 Board Practices, Board Pay Study

Key Findings Show Increases in Director Pay and Dramatic Decreases in the Number of Classified Boards

On January 30, 2007 Institutional Shareholder Services (ISS), a U.S.- based corporate governance and proxy voting services provider, released its 2007 Board Practices, Board Pay Study, a yearly report that examines the board structure and compensation of boards of directors at S&P 1500 companies based on 2006 disclosures. Among its key findings:

Decrease in Classified Boards
According to the survey, the proportion of S&P 500 companies with classified boards dropped a dramatic 8 percentage points. This finding has implications for democratic governance practices, as it means that for the first time, a majority of companies surveyed will hold annual elections for all their directors.

Rising Director Pay
Another key development was rising director pay, which was up 12 percent to an average of $160,493. According to the survey this can be attributed to: 1. A rise in cash pay levels; and 2. An increase in stock prices fueling the value of equity awards.

Extra Pay for Independent Chairmen Lower than for Company Affiliated Chairmen
The survey found a disparity in fees paid to non-executive chairs classified as independent directors, versus those affiliated with the companies they serve: extra pay for independents averaged $79,183, while that for affiliated chairmen averaged $189,852.

Less Stock Options, More Restricted and Deferred Share Awards
The survey reported a continuing decline in the use of stock options for director compensation. This was balanced by an increase in the use of restricted and deferred share awards (stocks of a company that are not fully transferable until certain conditions have been met): In 2006 only 54 percent of companies reported granting stock options to directors, compared to 58 percent in 2005 and 66 percent in 2004. Meanwhile the prevalence of restricted and/or deferred share awards jumped from 44 percent in 2005 to 51 percent in 2006. 

More Disclosure of Non-Employee Stock Ownership
In 2006, more companies disclosed stock ownership guidelines for non-employee board members. The proportion of study companies doing so rose to 37 percent, from 28 percent as of 2005, and is up to 56 percent at S&P 500 companies.

According Carol Bowie, Vice President of ISS’ Governance Research Service, “This landmark report demonstrates that companies are responding to shareholder concerns regarding board structure, independent leadership, and stock compensation. At the same time, directors’ pay continued to rise at about the same rate as executive compensation generally.”

For the full ISS 2007 Board Practices, Board Pay Study visit: http://www.issproxy.com/bookstore/index.jsp.

Posted 1/31/07

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Reforming Asia's Proxy Voting Systems

To dowload as .pdf

Proxy voting systems are not only a crucial aspect of a company's corporate governance structure but also often a significant determinant of how transparent and accountable a company is to its shareholders. All systems however are not made equal and despite increasing international investment, globalization, and economic inter-dependence between countries proxy voting systems vary drastically across regions and cultures. In their inaugural report on proxy voting in Asia, “Voting for Change: Bringing Proxy Voting Systems in Asia into the 21st Century," the Asian Corporate Governance Association, a non-profit research, advocacy, and education organization, analyses the proxy voting systems of 11 Asian markets comparing them to those in the US, UK and Australia, identifies ten major areas of weakness in these systems, and makes recommendations for reform. Below is the executive summary of the report and its key findings, reproduced with permission.

“Voting for Change: Bringing Proxy Voting Systems in Asia into the 21st Century"

Executive Summary

This is the inaugural report by the Asian Corporate Governance Association (ACGA) on the subject of impediments to proxy voting in Asia. It covers 11 Asian markets and three benchmark markets—Australia, UK and US. The material in this report is based on original research by ACGA and a survey of major institutional investors actively voting their shares in the region. The respondents to this survey manage in excess of US$3 trillion globally.

Key findings—By market

• Hong Kong emerges as the clear leader in Asia, several percentage points ahead of Singapore. Yet Hong Kong still scores well below Australia, UK and US.

• Japan and Taiwan are rated as having the weakest voting systems, with Korea not
far behind.

• Most South-east Asian markets fall in the middle of the regional ranking tables.

• Due to the limited accessibility of China’s A-share markets in Shanghai and Shenzhen, hence limited voting experiences among respondents, we chose not to include the China score in the main regional ranking but to put it below the other markets for reference purposes only.

Key findings—By Issue

• Proxy voting systems in Asia are, by and large, seriously antiquated and in need of
improvement. Investors are being disenfranchised.

• The top-five areas of concern included: Lack of independent audit of vote results; lack of publication of vote results; insufficient information on which to vote; no confirmation
that vote has been received; and the prevalence of voting by show of hands rather than by ballot/poll.

• Removing the many impediments to proxy voting would, we believe, contribute to
stronger and more efficient capital-market development in Asia.

Recommendations/Action Points

This report contains a series of recommendations on which listed companies, investors,
regulators and intermediaries (custodian banks, share registrars) can act to help bring about significant improvements in proxy voting systems in Asia.

Most of the problems in voting systems around the region could be resolved quickly if the key players chose to act. And many of the solutions would not have to be regulatory driven. There is an opportunity for market players, primarily listed companies and investors, to resolve these issues efficiently and cost-effectively.

Something that will take longer to put in place is a national electronic voting platform. We
strongly urge governments and stock exchanges to examine this issue as soon as possible.

For the full survey follow this link.

Posted 9/20/06

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Measuring Ethics And Governance in Banking: A Survey of Latin America's Largest Banks

A new survey released by Latin Finance Magazine and Management & Excellence SA, a research and rating company in the areas of ethics, sustainability, corporate governance, transparency and corporate social responsibility (CSR), ranks the leading Latin American banks on their ethics, governance and CSR practices. The survey examines Latin America's 24 largest banks, ranking each on five broad areas: ethics, corporate governance, corporate social responsibility, sustainability and transparency.

The report includes a useful list of 280 standards which relate to these areas and are accepted in the banking business or mandated by regulators or stock exchanges. The study shows which banks comply with which criteria, granting each bank a final compliance/performance score in each of the five categories and ranking them in each of these areas. The standards include:
 
• 8 types of financial data banks should have to be transparent
• 12 areas of productivity measurement systems on HR performance, customer satisfaction,
product quality, and others
• 20 points a bank’s code of ethics/conduct should include
• 3 pillars needed to fulfill Basel requirements
• 8 criteria of good crisis management
• 14 topics a website should have such as a corporate governance policy or executives´ data

According to Latin Finance, aside from the obvious reputational benefits of corporate adherence to ethical standards, there is an "added and often unspoken reason" why banks in particular should adhere to these “soft” management standards: banks tend to be unpopular with customers and thus easier political targets, particularly as regulators, politicians, the media and investors increase their focus on corporate ethics and sustainability in general and consider more rigorous supervision and regulation. Moreover, the increasing cost associated with non-compliance and the rise of socially responsible investing has made ethics, CSR, and governance performance a higher priority for investors.

Latin Finance and Management & Excellence SA's Ranking of Latin American Banks
(overall ranking, management indices according to ethics, corporate governance, corporate social responsibility sustainability and transparency)

Source: M&E and Latin Finance

For the full report, see Latin Finance's website

Posted 9/19/06

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2006 Annual Edelman Trust Barometer

(The following is a summary of an extensive report by Edelman. For more information please see their website)
 
In its far-reaching 2006 Annual Trust Barometer, Edelman, a leading international public relations firm, reports on the “state of trust” in key institutions around the world, including business, government, media and NGOs. Edelman’s public opinion surveys, known as its Trust Barometer, track trends and break down the results according to industry, region, and other factors such as the credibility of spokespeople. Using interviews with Edelman staff, the report attempts to analyze and explain its findings in terms of political, social and economic developments as well as lay out the implications the results hold for institutions.

The Barometer, which was fielded in October 2005 by WorldOne Research, consisted of a 25-minute telephone survey of opinion leaders (screened to be 35-64, have an annual income of over $75,000 or equivalent; college graduates; report being engaged in media, business, and public policy issues). 400 interviews were conducted in the US; 200 in China; and 150 each in the UK, Germany, France, Brazil, Japan, Canada, Italy, Spain, and South Korea.

Overall Trust in Institutions by Region

According to Micheal Deaver, Edelman’s Vice Chairman, the highest trust levels were found in Asia and in Brazil and the lowest in Europe. In the US, trust has been fairly consistent over the past five years, although trust in government and the media is at an all time low.

Trust in Institutions By Region

How much do you trust each institution to do what is right?

Nationality of Respondents

*Europe=France, Germany, Italy, Spain     **Asia= Japan, China, and South Korea

US Trust in Institutions: A Five Year Trend

How much do you trust each institution to do what is right?

European* Trust in Institutions: A Five Year Trend

How much do you trust each institution to do what is right?

*France, Germany, UK

The Costs of Mistrust to Companies

The Barometer reports that, “trust is more than a bonus, it is a tangible asset that must be created, sustained and built upon….just as trust benefits companies, mistrust or lost trust has costs.”

The following survey attempts to measure these costs:

Tell me if you have ever done this in relation to a company you do not trust:

Refused to buy their products or services
US: 84%
Europe: 81%
Asia: 72%
Canada: 76%
Brazil: 81%

Refused to invest in them:
US: 74%
Europe: 72%
Asia: 64%
Canada: 64%
Brazil: 57%

Trust in Companies By Industry

Recognizing that a company’s ability to gain the trust of its stakeholder is heavily influenced by perceptions of the industry to which it belongs, the Barometer seeks to breakdown levels of trust in companies by industry and area. It finds that while technology, retail and consumer products are the overall most trusted sectors globally, and Media/Entertainment and Energy the least, culture, recent history, and political circumstances have created striking variation in regions’ propensity to trust certain industries, as evidenced by the following survey:

How much do you trust each industry to do what is right?

Low Rank

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ISS Report on the 2006 Proxy Season: An Issue-by-Issue Review

The 2006 Proxy Season has come to an end leaving those who follow environmental, social and governance (ESG) issues with many questions: What has changed? Did the campaigns and media coverage surrounding such issues as climate change and executive pay have a real impact on corporate practices? What, if any trends, emerged? And, which companies performed better on ESG issues?

In its June/July 2006 issue of the Corporate Social Issues Reporter, of the Social Issues Service of Institutional Shareholders Services, a leading provider of proxy voting and corporate governance services and research, summarizes the 2006 Proxy Season. The following are excerpts from its report*.

* The report breaks its findings down by issue. The following issues have been omitted: animal welfare, equal employment, health issues, military issues, Northern Ireland, tobacco, violent videos, flat tax. To read about these issues as well as a checklist of key 2006 shareholder resolutions and two articles on Wal-Mart’s annual shareholder meeting and Sudan resolutions at pension funds see the full report.

Support Levels Increase for Key Social Issues Proposals

By Carolyn Mathiasen & Meg Voorhes

Investors are looking with in-creasing favor on proposals asking companies to disclose and monitor their political contributions, to expand or report on their fair employment policies, and to issue broad-based reports on sustainability.  These types of proposals have averaged more than 19 percent support so far this season, according to the results now available for votes at U.S. corporate annual meetings through June 30.  Investors also gave strong support to selected proposals on human rights and environmental issues.  In fact, 22 percent of the social issues proposals that came to votes through June 30 have been supported by more than 15 percent of the shares voted; only 15 percent of the social issues proposals that came to votes in 2004 and 2005 surpassed this level of support. 

In contrast, investors overwhelmingly dismissed proposals asking companies to drop equal treatment protections for gay employees, to review or improve animal welfare, and—in the case of tobacco companies—to restrict their marketing or to support smoking bans.  Proposals along these lines averaged less than 6 percent. 

The 177 social issues proposals that have come to votes through June represent only about half the number that shareholder advocates originally filed for this period.  Shareholder proponents withdrew many of their proposals before they came to votes, often after fruitful discussions with the corporate managements in question.  In other cases, companies were able to win the go-ahead from the staff of the Securities and Exchange Commission to omit certain proposals from their proxy statements.  (See Table 1.)

Proxy Season at the SEC
The SEC staff’s intentions concerning a new policy on business risk and social policy resolutions, applied occasionally and somewhat mystifyingly in spring 2005, became clearer in 2006.  In June 2005, the staff had issued a bulletin (14C) explaining that resolutions can be excluded as “ordinary business” issues not appropriate for shareholder scrutiny if they involve “an internal assessment of the risks or liabilities that the company faces as a result of its operations that may adversely affect the environment or the public’s health.”  In the spring 2006 proxy season it began issuing decisions referring back to the bulletin. 

From early calls, it looked as if the policy might decimate the 2006 slate of resolutions on health and the environment.  The staff cited it to allow three drug companies to omit proposals on their drug pricing and distribution policies that had received high support in 2005.  It also cited the bulletin in allowing the omission of three resolutions from a long-standing campaign asking companies to review the economic effects of AIDS and other pandemics on their operations, and of four proposals related to environmental issues.

In later decisions, though, the SEC staff refused to invoke the policy, disagreeing that it applied to two of the proposals in a new shareholder campaign on toxic chemicals, or that it could be used to exclude environmental proposals on Dow Chemical’s Union Carbide subsidiary in India or Chevron’s toxic waste legacy in Ecuador.  A look at the various decisions left some observers puzzled; the staff has long complained that the shareholder proposal rule puts it in the position of having to make too many judgment calls, but the necessity of deciding what involves an internal assessment of risks and what does not could be seen as taking it farther into the territory of subjectivity.

In other 2006 decisions of note at the SEC, the staff required Ford and General Motors to print proposals from conservatives who appear skeptical of global warming, which asked for information on the companies’ climate change science.  In 2004 and 2005 the staff had allowed both firms to omit very similar versions of those resolutions.  Otherwise, SEC staff decisions of the 2006 proxy season marched with precedent.  Among other things, several companies were allowed to omit proposals asking for sustainability reports on grounds that existing reporting made them moot, but this argument did not always work.  All told, the staff has allowed companies with meetings through June to omit 51 resolutions, down a little from the 57 for the corresponding period last year, as shown in Table 1.

Withdrawal Trends in 2006
Environmental issues stand out among the withdrawal agreements achieved so far this year.  Among them was the settlement of the long-running request for information from General Electric on expenses incurred in opposing cleanup of PCB-contaminated waterways in New York. Both resolutions on bottle recycling were withdrawn after solid agreements, as were a number of proposals on climate change.

In other areas, corporate America continued to separate itself from social conservatives on the gay rights issue, responding quickly to requests for amendment of EEO policies to include nondiscrimination on the grounds of sexual orientation.  Eighteen resolutions on the issue were withdrawn, leaving only five to come to votes.  Another high-profile withdrawal in the EEO category occurred after Wal-Mart posted its EEO-1 forms and comparative data on its website.

Sustainability reporting and board diversity continued to be areas often productive of withdrawal agreements.  Companies also were more likely to work out agreements on political contributions resolutions than in the past—though many more came to votes than were withdrawn.  The total of withdrawal agreements for 2006 now stands at 98, making it unlikely that the number will reach the all-time high of 113 recorded for 2005.

Summary of the 2006 Proxy Season By Issue:

Vote Calculation
What follows is a summary, by category, of the 2006 spring proxy season, including the most interesting votes, withdrawals and decisions at the SEC on whether resolutions could be omitted.  Companies at which proposals did well enough to qualify for resubmission next year are highlighted in bold face.  All vote support levels are calculated according to the formula the SEC uses to determine resubmission eligibility: the percentage of shares voted “for” out of the total voted “for” and “against,” excluding abstentions.  First-year proposals must win at least 3 percent support under the formula to qualify for resubmission an additional year, second-year proposals must get at least 6 percent, and proposals in their third year or more must score at least 10 percent.  (If the proposal fails to clear the pertinent threshold, it may not be resubmitted at the company for another three years.)

Board Diversity
Church-affiliated investors and the Calvert Group continued to search their portfolios for companies with all-male boards and to question them about changing their board selection criteria.  Fourteen resolutions were filed, but withdrawal negotiations were so successful that only three came to votes.  There were no challenges on this well-tested issue at the SEC.

Votes
A board diversity proposal from Christus Health received 10.2 percent support at Torchmark; vote results are not yet available for similar proposals at Bed Bath and Beyond and Monster Worldwide, which were voted on in June. 

Withdrawals
Calvert Group withdrew at six companies that agreed to amend their criteria for board selection to include diversity—Astoria Financial, Cheesecake Factory, Commerce Bancorp, Danaher, Panera Bread and TD Ameritrade.  (It also withdrew at Renal Care, which was sold.)  Church groups reached agreements at American Greetings, Overseas Shipholdings and Viacom and withdrew at CBS when they found they had the wrong stock.

Charitable Contributions
For 2006, two types of proposals asking for general disclosure of charitable contributions came to votes, at a total of six companies.  While both types asked corporations to disclose all charitable contributions, the supporting statements made clear that the proponents are particularly opposed to contributions to particular organizations, in one case Human Life International with Planned Parenthood and in the other case the National Legal and Policy Center with Jesse Jackson’s Rainbow/PUSH Coalition.  The fact that the SEC staff allowed these resolutions to go for ward cements a policy change signaled two and a half years ago, when the staff began to allow contributions proposals that were “facially neutral” but in which the motivations of the proponents were apparent.

Votes
The opponents of Planned Parenthood won support of about 6 percent for their resolutions asking Johnson & Johnson and Northern Trust to disclose their charitable contributions.  Of the four proposals that the National Legal and Policy Center filed, vote results are in at Boeing (10.4 percent), Citigroup (8.7 percent) and PepsiCo (5.8 percent); the Social Issues Service is still awaiting the vote result at Coca-Cola. 

Two resolutions from other proponents came to votes on charitable contributions.  A proposal protesting a donation by Kraft Foods in support of the Gay Games in Chicago this summer received 0.1 percent, the lowest vote of the season; however, Altria controls 98 percent of the voting equity in Kraft.  The Social Issues Service is still awaiting results for Trillium’s proposal asking Avon Products to report in more detail on its fundraising for breast cancer research and public awareness. 
          
Action at the SEC, Withdrawals
PepsiCo was the one company to challenge the resolution from the National Legal and Policy Center asking it to report on its charitable contributions.  The center, a Virginia-based conservative group, tried to propose resolutions in 2005 specifically questioning contributions to Rainbow/PUSH, but fell afoul of an SEC staff precedent disallowing resolutions on targeted contributions. To avoid that fate this year, it approached the issue by picking up the template of the resolutions on political contributions developed by the Center for Political Accountability (discussed under “Political Contributions,” below) and modifying it for charitable contributions.  PepsiCo argued, without success, that it should be able to omit the proposal because the proponent was actually concerned about a specific issue, rather than interested in broad disclosure, but the SEC staff disagreed.
          
Environment
The big environment category originally involved the filing of 77 proposals, 46 of which came to votes.  Activity spanned the new anti-toxics campaign from the Investor Environmental Health Network to a continued focus on climate change.  The category included some of the most significant withdrawals and omissions of the year, as well as seven of the proposals that won support of 15 percent or more of the shares voted.  (See Table 2.)

Votes:  Ten proposals relating to greenhouse gas emissions, energy efficiency or climate change came to votes from a broad array of proponents; results are in for nine, all but one of which may be resubmitted in 2007, if the proponents so choose. 

Five of these proposals were filed by proponents who believe that climate change is a major problem and that companies need to reduce their greenhouse gas emissions.  The Nathan Cummings Foundation, Sierra Club and New England Friends filed proposals asking four companies for reports on energy efficiency plans in light of growing public pressure on the issue.  Investors supported the proposal by a whopping 39 percent at Standard Pacific, according to preliminary results, a new record for support on the climate change issue.  The proposal got more modest support—of 6 to 9 percent—at D.R. Horton and Whole Foods Market; the latter had announced just before its January meeting a landmark purchase of renewable energy credits from wind farms that it said would offset 100 percent of its energy use, making it the only Fortune 500 firm to achieve this goal.  (The Social Issues Service is still awaiting results for the same proposal at Bed Bath & Beyond’s late June meeting.)  After Standard Pacific, the next highest vote for a climate-related proposal was the 22.6 percent achieved by Trillium’s resolution asking Dominion Resources to report on and reduce its greenhouse gas emissions.  Green Century’s second-year proposal asking Ford Motor to report on its lobbying activities againsttighter fuel economy was supported by 7.3 percent of the shares voted, according to a preliminary report. 

The filers of the remaining four proposals, in contrast, are dubious that climate change is happening or that companies need to take particular action about it.  Carl Olson’s and Mark Seidenberg’s proposals asking for an annual “scientific report on global warming/cooling” received 4 percent support at Ford Motor and 7 percent at Occidental Petroleum, but only 2 percent at General Motors.  A proposal along similar lines from Action Fund Management at General Electric received 6.9 percent support. 

Preliminary or final vote results are in for the six proposals on genetically engineered organisms, and all but one cleared their resubmission levels.  The highest vote—at 17.6 percent support—came at Wendy’s International, where a second-year proposal asked it to identify on its menus where it uses genetically modified ingredients.  Similar proposals received sufficient support for resubmission, albeit in the single digits, at McDonald’s and Safeway, but fell short at Yum Brands.  Proposals asking Dow Chemical and DuPont to report on the potential adverse impact associated with their development of genetically engineered plants each received about 7 percent support. 

The year 2006 was notable for several largely new shareholder campaigns on environmental issues.  One focused on protecting old forests.  International Paper and Kimberly-Clark, which source much of their fiber from Canada’s Boreal forest, the largest remaining intact forest in North America, were asked in first-year proposals from Green Century and Domini to consider phasing out the use of fiber not certified by the Forest Stewardship Council.  The proposals achieved single-digit sup port.  A related proposal from Calvert asking Weyerhaeuser to assess the feasibility of obtaining FSC certification received 5 percent support, according to a preliminary report.  The Social Issues Service is still awaiting vote results for a related proposal asking Lowes to adopt a forest protection policy in sourcing its lumber and other forestry products.

Another group of proposals focused on companies’ potentially or historically harmful impact on local communities because of toxic emissions.  The highest scoring resolution this year in this category appears to be Mercy Investment’s first-year proposal asking Synagro, whose sewage-to-fertilizer operations in the Bronx have prompted complaints, to review and reduce its toxic emissions; it received 31 percent support, according to a preliminary tally.  A first-year proposal asking Honeywell to report on how it is warning local communities around Onondaga Lake in upstate New York about health hazards resulting from pollution from its predecessor companies received 7 percent support.  The Social Issues Service is still awaiting vote results for Martha Hamblin’s second-year proposal asking Stericycle to phase out waste incineration. 
          
The Episcopal Church filed new resolutions asking ConocoPhillips and ExxonMobil to report on their environmental impacts on the communities where they operate, with particular attention to poor communities.  According to a preliminary tally, the proposal won 20 percent support at ConocoPhillips, one of the highest votes in the environmental arena this season, and 10 percent at Exxon.  Proposals from Green Century asking Du Pont and Dow Chemical to report on how they might reduce the threat of potential catastrophic chemical releases from their facilities each received about 7 percent support.  

Two proposals looked at the damage to communities outside the United States.  A  second-year New York City proposal focused on the 1984 toxic disaster in Bhopal, India, asking Dow, which subsequently acquired the company whose factory caused the disaster, to report on “ any new initiatives instituted by management to address specific health, environmental and social concerns” of the Bhopal survivors.  It received just over 6 percent support, according to preliminary results.  At Chevron, a Trillium proposal asking the company to report on its legal and public relations expenses connected to past pollution caused by Texaco drilling sites in Ecuador received 8.4 percent. 

A shareholder focus on toxic chemicals was also evident in several proposals that asked companies to consider reformulating their products or services to avoid or reduce the use of toxic chemicals, or in the case of retailers, to reduce the number of products they stock with toxic ingredients.  The highest-scoring proposal in this category was at Du Pont, where LongView won 28.9 percent support for its request that the company report on “the feasibility of an expeditious phase-out of the use of PFOA in the production of all DuPont products.”  Perfluorooctanoic acid, a chemical essential in the production of fluoropolymers used in Teflon and a host of other products, is biopersistent and is found in the blood of nearly all Americans; in January, a scientific advisory board to the EPA found that PFOA is a “likely carcinogen.”  According to preliminary results, Green Century achieved 9 percent support for its first-year proposal asking Servicemaster to report on the feasibility of phasing out synthetic pesticides in its TruGreen ChemLawn lawn care business.  Domini won just under 9 percent support for its proposal asking Becton Dickinson to review the use of brominated flame retardants in its medical supplies and devices.  Proposals from Boston Common Asset Management at CVS, and from Green Century at Whole Foods, each won about 10 percent support.  A vote result is not available yet for Domini’s proposal at Avon Products.
 
As You Sow’s proposal asking Apple Computer to report on ways to improve its computer recycling program was also motivated by concern over toxics, since computers contain significant levels of lead, mercury, cadmium, and hexavalent chromium; the first-year proposal won 9.3 percent support.

Five proposals came to votes that focused on conserving natural resources—such as water—and natural habitats.  The top-scorer may be Green Century’s first-year proposal asking ConocoPhillips to report on “the potential environmental damage that would result from drilling for oil and gas in the areas inside the National Petroleum Reserve – Alaska”; preliminary results indicate it won 26 percent support.  Green Century also asked both Chevron and Exxon for a second time to report on the potential environmental damage that would result from the company drilling for oil and gas in protected areas such as IUCN Management Categories I-IV and Marine Management Categories l-V, national parks, monuments, and wildlife refuges (such as the Arctic National Wildlife Refuge), and World Heritage Sites.  Both proposals received less spectacular support of around 8 percent, but enough to clear the resubmission threshold of 6 percent.  Harrington Investments won 6.9 percent support for its proposal that Coca-Cola report on “the potential environmental and public health damage of each of its plants, affiliates and proposed ven tures extracting water from areas of water scarcity in India.”  No vote result has been reported yet for the Sierra Club’s proposal on water use at Peabody Energy. 

On the question of nuclear power plant safety, religious investors got 8 percent support for their proposal asking Ameren to report on the pros and cons of getting a 20-year extension of its operating license at the Callaway nuclear plant.  No tally is available yet for the AFL-CIO’s proposal at Progress Energy asking for improvements in plant security.

Withdrawals on climate change
Proponents continued to have good success negotiating withdrawals on climate change issues at energy companies.  The standard proposal asking for a report on greenhouse gas emissions was withdrawn at Anadarko Petroleum, Devon Energy, Peabody Energy and four Midwestern utilities when the companies promised to do the report.  The withdrawals at the utilities  Alliant, Great Plains, MGE and WPS came after they agreed to disclose how they are preparing for regulatory controls on greenhouse gas emissions, including potential impacts on existing and proposed power plants.  Also withdrawn in the climate change area were three proposals at ExxonMobil.  The company argued that its publication of a February 2006 report on greenhouse gas emissions and energy use trends, called Tomorrow’s Energy, meant that it had substantially implemented all three proposals, and the proponents decided to withdraw. 
          
The Sisters of St. Dominic, an early leader in the climate change shareholder campaign, withdrew a resolution asking General Motors to reduce greenhouse emissions.  The company has significantly increased its reporting on climate change in the last year.

In the related campaign on energy efficiency in buildings, proponents were able to achieve four withdrawals when the companies agreed to provide significant amount of information on energy usage and energy efficiency measures and goals.  The withdrawals came at Home Depot, Liberty Property, Lowe’s and Simon Property.

Other environmental withdrawals
A number of other important withdrawals were registered in the environment category.  Early in the year, church shareholders ended a decade-long campaign to get General Electric to disclose information about the costs of an effort to delay cleanup of PCBs, especially in the Hudson River.  The company published extensive information on PCB costs in a letter to the SEC arguing that its long-running shareholder resolution on the issue was now moot, and the church proponents agreed.

Only one proposal in the new campaign on toxic substances was withdrawn—a proposal to Johnson & Johnson asking for a report on reformulating cosmetics to meet European Union standards.  The withdrawal came after the company agreed to continue meeting with the proponent, Citizens Funds, to ensure greater transparency and safer products.
          
Walden Asset Management was able to withdraw both of this year’s proposals on bottle recycling—at PepsiCo and Coca-Cola, with the latter withdrawal coming at the last minute after the company had published the proxy statement.  Both companies agreed to seek quantitative and national goals and a timeline for increased recycling, through a multi-stakeholder process. 

Domini Social Investments withdrew one of its resolutions asking companies to report on “the feasibility of phasing out our company’s use of non-FSC [Forest Stewardship Council] certified fiber within 10 years.” The withdrawal came at the Limited, where the proponents had been concerned that 95 percent of the 400 million Victoria’s Secret catalogs it prints each year use virgin fiber paper with little or no recycled content. Domini told the Social Issues Service the withdrawal took place after the company agreed to “conduct a feasibility study and implementation plan for increasing the use of recycled content and FSC-certified fiber in” its paper.

Action at the SEC
As discussed in the overview of SEC activity above, most of the omissions of environmental resolutions involved application of a policy spelled out June 25, 2005, in SEC staff bulletin 14C, which said companies should be able to exclude resolutions that involved evaluation of the business risk of operations that adversely affect the environment. 
          
Environmental omissions that cited bulletin 14C involved a New York City proposal to Newmont Mining on the environmental effects of operations in Indonesia, resolutions from the Service Employees International Union Master Trust asking Wachovia and Wells Fargo to report on the effect of the challenges created by global climate change on business strategy, and a resolution from the Nathan Cummings Foundation asking Ryland Group to “assess its response to rising regulatory, competitive and public pressure to increase energy efficiency.”  (All told, eight companies had received the energy efficiency proposal for spring meetings, but only Ryland had challenged.) Although CVS and DuPont were not allowed to exclude resolutions in the new toxics campaign as ordinary business under the risk assessment policy, Wal-Mart was successful in getting its new toxics resolution excluded on ordinary business grounds for a different reason.  The resolution asked for a report “evaluating company policies and procedures for systematically minimizing customers’ exposure to toxic substances in products….”  The staff agreed with the company’s argument that the roposal constituted ordinary business because it “seeks to micro-manage the company’s retail business practices and inventory of products.”  The resolution at CVS asked about the feasibility of reformulating private label cosmetics products—raising the question of whether it might have been excludable if the company had made Wal-Mart’s simpler argument instead of getting into risk assessment.

Equal Employment
Proposals in the EEO category were largely familiar, including a handful of the resolutions asking for disclosure of EEO-1 information that have been around since social policy resolutions first appeared in the 1970s and the now much larger New York City-led campaign to get companies to amend their EEO policies to bar discrimination against gay employees.  There were also a handful of resolutions from conservatives asking companies to drop sexual orientation from their EEO policies.

Votes
Five proposals came to votes concerning non-discrimination on the basis of sexual orientation or sexual identity.  Results are only in for two, but they suggest that investors continue to show strong support for these proposals.  According to preliminary results, the resolution asking Exxon to amend its company non-discrimination policy to include sexual orientation received just under 35 percent support.  If confirmed, this represents the highest vote ever for this proposal at the company.  The proposal was first filed in 1999, receiving 6 percent support, and has gained support with each consecutive year.  A similar first-year proposal at Leggett & Platt also did well, winning 24.7 percent. 
          
Investors also showed strong support, as they have in past years, for proposals asking companies to report on their EEO policies with regard to women and racial minorities.  At Home Depot, a second-year proposal along these lines, prompted by the company’s reversal of a 2001 decision to provide statistical data to shareholders on its work force by race and sex, won 35.9 percent, up nearly six percentage points from 2005.  At Lockheed Martin, a similar proposal from religious investors won 25.1 percent the first time out.  In 2004, the Equal Employment Opportunity Commission determined the company allowed a racially hostile work environment for black employees “to grow in intensity” at its plant in Meridian, Miss., where a white employee in 2003 fatally shot six other employees, five of whom were black.  The EEOC also filed suit against the company in 2005 alleging race discrimination at other facilities.  An EEO proposal at Yum Brands, however, appears to have lost ground; it received 9.2 percent, down from 13 percent in 2005. 

In contrast to the above proposals, resolutions from social conservatives asking companies to drop protections for gays and lesbians from their EEO policies fared poorly.  Of the four that came to votes, only Rob ert Hurley’s proposal at Ford Motor did well enough, at 4.8 percent support, to be eligible for resubmission.  Proposals at American Express, Bank of America and JPMorgan Chase received support of 2 percent or less. 

Withdrawals
Once again, resolutions asking companies to add sexual orientation anti-bias policies to their EEO statements found favor in the corporate world.  Proponents were able to withdraw 14 of 18 of those proposals because companies agreed to amend their EEO policies or demonstrated that they had already had gay rights policies in place.  The withdrawals were registered at Baldor Electric, C.R. Bard, CenturyTel, Computer Sciences, Convergys, Cooper Tire & Rubber, Emerson Electric, Fortune Brands, General Dynamics, Halliburton, Paccar, Strayer Education, Goodyear Tire & Rubber and Sherwin-Williams.  On top of that, proponents withdrew four of five proposals asking companies to implement the more extensive Equality Principles on Sexual Orientation after reaching agreements.  Those withdrawals came at Aquila, DTE Energy, Oneok and Wendy’s.

Proponents also reached two withdrawal agreements in the long-running campaign to get companies to release their equal employment data.  One of those agreements culminated in the withdrawal of a highly publicized shareholder resolution to Wal-Mart.  The withdrawal came after the company posted its entire EEO-1 form along with comparative data on its website.  A large coalition of SRI funds and church groups had been proposing a resolution since 2002 asking the company to release its EEO-1 data.  Against the backdrop of the largest workplace bias lawsuit in U.S. history, votes for the proposal had increased steadily, from 11.3 percent the first year to 18.8 percent in 2005.

Walden Asset Management also withdrew a resolution asking for EEO reporting after receiving information from Donaldson.

Activity at the SEC
There were no SEC decisions involving the now well-tested proposals on EEO reporting and adding sexual orientation nondiscrimination statements.  Companies made unsuccessful stabs at getting the SEC staff to let them omit the new proposals for dropping sexual orientation protections from their EEO policies, although they were allowed to delete some of the inflammatory supporting statement as false and misleading. 

Executive Pay and Social Issues
The number of resolutions on linking executive pay to social performance measures dropped to nine from 19 in 2005 and 17 the year before that.  Many of the proposals were requests that companies take general social performance into their calculations rather than tie pay to specific social questions.
          
Votes
Proposals asking that executive compensation be linked to improvements in the company’s social or economic performance came to votes at Amgen, AT&T, Du Pont, Exxon and Ford Motor.  The highest of the votes, albeit preliminary, came at ExxonMobil, where Northstar appears to have won about 13 percent support for its proposal asking for a report comparing total pay in 1995 and 2005 for the CEO to that of its lowest-paid workers and considering whether executive pay is excessive or should be moderated in times of employee layoffs.  A similar proposal at AT&T, filed by Harrington Investments, won 11.9 percent support.  A second proposal at Exxon, from the School Sisters of Notre Dame, asked that executive compensation goals include meeting explicit environmental and social performance criteria as well as financial criteria; it received 9 percent, according to a preliminary estimate.  At Ford Motor, a first-year proposal from an individual shareholder asking that the board consider “linking a significant portion of senior executive compensation to progress in reducing lifetime product greenhouse gas emissions from the company’s new passenger vehicles” got 4.8 percent, according to a preliminary tally.  The DuPont Workers have struck out with their third-year proposal at DuPont, however; it fell somewhat short of the 10 percent resubmission threshold it needed to clear.  No vote result is available yet at Amgen. 
          
In addition to the proposals on how executive pay is formulated, a third-year proposal from Northstar asking for a report on the distribution of stock options by race and sex at Wal-Mart received 10.2 percent support, down a few percentage points from the previous two years. 
          
Activity at the SEC