Risk & Governance Weekly

Management at the Boston-based real estate developer has ignored requests to declassify its board, even though shareholder proposals on the topic have received more than 70 percent support since 2004. In 2007, a declassification proposal won 82.4 percent support, and three board members up for re-election were opposed by 36 to 44 percent of votes cast. A declassification measure, submitted by Evelyn Y. Davis, is on the ballot again this year. The company defends its staggered board, saying it provides stability and helps directors make decisions that are in the shareholders’ best interests.

The CtW Investment Group is urging shareholders to vote against the re-election of audit committee member Donald Kiernan and compensation committee chair Robert Knox. The labor-affiliated fund claims that Kiernan failed to adequately oversee the accounting practices at the Naples, Fla.-based hospital operator, which took a $39 million write-down in July for bills owed by uninsured patients. CtW opposes Knox for failing to “maintain the link between pay and performance.” In an April 11 letter to shareholders, CtW said Knox’s committee approved a 12.2 percent pay increase for former CEO Joseph Vumbacco in 2007, changed performance targets mid-year, and approved accelerated vesting of stock options when Vumbacco retired. The company’s stock price has fallen about 36 percent in the past year.

The California State Teachers’ Retirement System (CalSTRS) is calling on shareholders to support its proposal that asks ONEOK to produce a report analyzing its capacity for reducing greenhouse gas (GHG) emissions. The Tulsa, Okla.-based natural gas company and other energy firms lead the world in production of greenhouse gases that cause climate change, CalSTRS claims in an April 28 press release. This proposal is the only one that CalSTRS is putting forward this year, and its first shareowner proposal since 2004. The company opposes the measure, saying it is already addressing the issue of GHG emissions by developing carbon sequestering technologies, maintaining a GHG inventory, and improving pipelines.

Management has failed to implement a majority-supported proposal by the Trowel Trades S&P 500 Index Fund--which invests for the International Union of Bricklayers and Allied Craftworkers--asking for an investor vote on future “golden parachute” payments in case of a change in control. The measure received 75 percent support at the Plano, Tex.-based retailer in 2007. The Bricklayers have submitted the proposal again this year. JCPenney management argues that the human resources and compensation committees are best qualified to determine whether exit packages are appropriate. The company also notes it has made some governance changes, including adopting a majority voting standard for director elections after a resolution on the topic won 56.8 percent support last year.

Obrem Capital Management is trying to remove five incumbent directors and amend the bylaws to elect six of its own nominees. Obrem, which owns 15 percent of the San Jose, Calif.-based integrated circuit manufacturer, also wants to eliminate the company’s “poison pill” takeover defense and put the firm up for sale. Obrem claims that Micrel has lost more $1 billion in shareholder value since 2001 under the leadership of co-founder and CEO Robert Zinn, who owns 16.5 percent of the company’s stock. Management argues that Obrem is trying to take control of the company for short-term gain, at the expense of longer-term shareholders.