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You Need to Act Like an Owner: Adopting a Proxy Voting Policy
 There are simple, inexpensive and effective steps that trustees can take in the corporate governance arena to safeguard the equity investments of their beneficiaries in the future. Greg Kinczewski, with the Marco Consulting Group, discussed the first: adopting a voting policy that ensures that their funds' shares in publicly-traded companies are voted from a shareholder perspective.
The policy, developed with the NCPERS Washington staff, enables trustees, at no expense, to direct their equity managers or proxy voting agents on how to vote on the most common and recurring issues. NCPERS recommends that all public pension plans adopt proxy voting guidelines.
Kinczewski said the goal of the campaign to encourage use of a proxy voting policy is to protect fund investments-without additional expenses to the fund or increases in trustee time and energy. The policy directs the proxy voting agents on how to vote on most common issues, such as the election of candidates for boards of directors, the choice of a corporation's auditors and executive compensation.
A director should, according to Kinczewski, serve on no more than three boards. The value of carefully considering board candidates was most evident in the Enron situation. Kinczewski suggested that if the corporation's shareholders had elected directors who would have paid closer attention to what management was doing, many costly problems could have been avoided.
The difficulties that come from using consultants as auditors has been highlighted as a cause of many corporate financial scandals. Kinczewski noted that this same problem occurred with Enron, WorldCom and many others in recent years. The SEC previously did not even require companies to disclose what auditors were being paid, a situation since corrected.
Kinczewski offered several examples of excessive compensation. In one situation where he is a board member for Union Pacific, he discussed a recent proposal to allow a compensation committee to use any criteria to give a $3 million bonus to its chief executive-a proposal he helped defeat.
"This policy does not cure all proxy problems. Some important issues must be left to proxy voting agent's discretion," Kinczewski said. One example is the broad issue of mergers and acquisitions, which are again on the rise.
"Act like an owner, not a rubberstamp," Kinczewski encouraged the delegates. "You can eliminate contradictory votes by different managers at the same company-and be part of the solution, not the problem."
Greg Kinczewski provides the Marco Consulting Group with legal counsel and is in charge of its proxy voting service, which analyzes and votes on shareholder issues at more than 4,500 U.S. and foreign companies each year. Prior to joining the Marco Consulting Group in 1991, Greg reported on the White House, Congress and the Pentagon, and served as a press aide on U.S. Congressman Abner J. Mikva's Congressional staff as well as a Field Director for Mikva's campaign staff.
To receive a copy of the proxy voting policy, contact NCPERS by email (info@NCPERS.org) or phone (1-877-202-5706).
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