As the proxy season dust settles, John Wilcox is zeroing in on the governance issues he thinks companies need to work on. One month into his new role as senior vice president and head of corporate governance at TIAA-Cref, he’s charged with setting the pension heavyweight’s governance agenda. Wilcox spent almost three decades at proxy adviser Georgeson Shareholder Communications and is well known in the IR world for his governance expertise.
IR magazine recently sat down with Wilcox to get his inside view on majority voting, institutional transparency and life inside one of the most influential pension funds.
How are you settling into your new role at TIAA-Cref?
During the past five years, after Georgeson merged with Shareholder Communications, I increasingly devoted my time to the International Corporate Governance Network (ICGN), which drew me closer to the institutional investment community. In a sense, I had been moving in the direction of this job without realizing it. I am happy here and it has been a very natural transition.
At Georgeson, you were an advocate for shareholder transparency. Have your feelings changed about institutional disclosure now?
I have not had any discussion with investment management people here about disclosure. We file 13Fs like everybody else and we do the disclosure required by law.
I have never advocated disclosure of trading information. What I have advocated is the disclosure of ownership information at the time of record dates and that there be disclosure of more ownership information than is currently made available.
Our securities laws are schizophrenic on this point in that they impose very comprehensive disclosure requirements on issuers and, at the same time, they deprive issuers of essential information about the people to whom they owe this disclosure information – that makes no sense. In the way our proxy system now operates, all shareholders, whether they want privacy or not, pay the cost of privacy. My view is those shareholders who want to use privacy should pay for it themselves.
What were the most controversial issues over the course of this proxy season?
The majority vote resolutions were very hot and I don’t know what the voting results are yet but I think they are going to make a big splash. With respect to stock plans, I think that is another big issue. It’s always hard to compile information on that but I think shareholders are exercising a tighter rein on issuance of shares for equity compensation plans.
Clearly this has become another form of the engagement model of governance – we kind of backed our way into it. We are looking at our 2006 campaign: TIAA-Cref does not generally throw out a whole lot of shareholder resolutions but we’re certainly going to continue our campaigns with respect to executive compensation. The use of withhold campaigns really changed the way shareholders think about the power of the vote.
What are your thoughts on majority voting as an alternative to the SEC’s controversial shareholder access rule?
Well, it’s not an alternative to the access rule. The access rule made the issue of majority voting acceptable to a wider group of people, especially corporations, because the access rule proposal caused everybody to think more deeply about how company directors are elected.
My experience is that many sophisticated people really didn’t understand how plurality voting works. They didn’t understand that votes withheld from directors are not deemed to be votes cast and, therefore, you could have an anomalous situation in which more votes are withheld than cast for directors – and they still get elected.
A lot of people who might have felt this was kind of a fringe matter realized it’s a core issue for the fundamental workings of shareholder democracy in the US. They also realized that our use of plurality voting in the election of directors is an anomaly when you look at international practice: almost every other country in the world requires a majority vote.
Why do you think there is so much debate around majority voting?
The reason there is so much caution in adopting it is that there needs to be clarity about what happens if and when a majority is not achieved for either a single director or a group of directors. There are no clear answers to that under state law – and we have to have some answers.
Where does the move to majority voting currently stand?
The American Bar Association’s committee on corporate laws is in charge of the model act [for majority voting] and it is looking at the whole question of implementation of majority voting for directors. It’s working on the legal issues with respect to majority voting and is going to have a preliminary paper out in July.
I feel very good about this. Lots of people from all sides of the governance spectrum are sitting down in a reasonable way, having discussions, analyzing the issue and working toward a solution. I think this is an unprecedented example of collaborative governance in action.
What is TIAA-Cref’s position on majority voting and other key governance issues?
We have not yet taken a formal position on majority voting outside of saying we are in favor of it. We want to wait and see what kind of detailed proposals are made; then we may be in a position to act. And I’m not certain TIAA-Cref would take a public position on the NYSE’s ten-day rule.
We are very interested in proxy reform but that is not very far along. Corporate governance principles are very important but if you cannot implement them, they are useless. Proxy voting is the primary governance tool so the system has to work well. We are very interested in making sure it does. These systems were developed under circumstances that existed at the time and we can do better.
