He shuns the spotlight, but is nonetheless credited with contributing to the corporate governance success of institutions like Calpers, New York State Common Retirement Fund and the International Brotherhood of Teamsters. His latest coup saw him aiding hedge fund Greenway Partners in a fight against Unisys, whose CEO Jim Unrue finally stepped aside in June.
George Garland is one of the unsung heroes of proxy fights: a proxy solicitor. Managements, raiders and activists make great copy, but winning shareholder votes can often be traced to the efforts of phone jockeys like Garland.
But Garland Associates Inc, unlike the more familiar proxy solicitation firms never works for management.
‘My philosophy is that shareholders own the company,’ pronounces Garland. ‘The board of directors has an obligation to run the company in the interests of the shareholders. Unfortunately, there are a lot of executives and directors who view the company as their own private preserve. Their greed may look different than it did in the 1980s, but it’s still alive and well.’
Accidental Calling
Garland actually came late to the role of shareholder rights advocate, stumbling into his calling by accident. Emerging from Columbia with a graduate degree in engineering, he tried life as a stockbroker and bond salesman before taking a part-time job manning the phones for a proxy solicitation firm. ‘With securities sales experience, I could explain complicated concepts to individual investors and convince them.’
That happened to be at the Carter Organization, solicitor to last decade’s greatest corporate raiders. T Boone Pickens, Irwin ‘The Liquidator’ Jacobs, and other Drexel Burnham Lambert luminaries all crossed Garland’s path. From talking to shareholders with 100 shares, he gradually took on responsibility for contacting more sophisticated investors, until he was talking to investors with 5 percent holdings.
So when Calpers sent Carter a bid request for its corporate governance solicitations and the firm declined due to client conflicts, Garland saw his chance to jump. He walked out in January 1989 and submitted his own proposal to the activist pension fund, which at that time was just getting into the full swing of its governance campaign. Within a few weeks, Garland received the call and joined Dale Hanson and Rich Koppes of the famed corporate governance posse.
Before long, other pension funds were cranking up their activist campaigns, and they too came to Garland for back-up. California State Teachers Retirement System hired him, while New York State Common Retirement Fund used him to try and get companies to divest their South African assets.
The State of Wisconsin Investment Board (SWIB) joined the Garland roster in 1992 to campaign against a tender offer at a small company. ‘That was the ice-breaker for SWIB,’ recalls Garland. ‘After that campaign, they saw proxy solicitation as a viable tool and so began their corporate governance program.’
Garland remembers the progress made in those early years. Before he began at Calpers, corporate governance proposals – elimination of poison pills, for example – were getting support in the low teens. During his first year with Calpers, the votes got pushed above 20 percent. Subsequent years saw support rise gradually into the majority, and Garland notes that such votes now get routine support of around 60 percent – ‘all because of our education process. The more shares we got behind us, the more credibility the sponsors had. And the more seriously people took the proposals, the better we did in contests.’
New Issues
These days the clout of Calpers, SWIB and others is such that foes regularly bow to their corporate governance wishes without a proxy vote. Of course there will always be new issues for Garland to tackle. Lately he has been helping SWIB target the practice of options repricing. Other high-profile campaigns were SWIB’s opposition to a Kmart plan for special retail shares in 1994 and Calpers’ 1994 run against US Shoe. He went on to work on the Teamsters’ proxy fight against Consolidated Freightways in 1994, as well as the union’s joint campaign with Unite against Kmart last year. Also last year, he helped Calpers and Florida Retirement System solicit votes against Archer Daniels Midland. Now his work for hedge funds like Greenway Partners is on the rise.
Surely no other individual can boast a track record like that, encompassing some of the hottest proxy contests in recent years. ‘Every institution has its own personality,’ muses the veteran proxy campaigner. ‘Everyone has a different philosophy for managing a corporate governance program.’ And with that observation, Garland returns to his Manhattan headquarters to keep manning the phones.
