Trillium Asset Management Letter to NYSE Regarding Rule Changes(A)
July 29, 2002
We appreciate the opportunity to submit commentary on the New York Stock Exchange’s Corporate Accountability and Listing Standards report. Here are our brief comments:
Background and Context of Comments
Trillium Asset Management, formerly Franklin Research & Development, has been in business as a registered investment advisor for over 20 years. We manage over $600 million in assets for over 500 clients, both institutional and individual, and operate out of four branches across the country. Our company was conceived and developed to promote transparency, shareholder activism and responsible leadership practices among those companies in which we invest on behalf of our clients. All of our clients have supported shareholder participation and democracy throughout our history and do so today with renewed energy and commitment. I speak on behalf of those clients, our own employees and Board of Directors.
From the beginning of our work in the late ’70’s, we have strongly believed that there are good and honest corporate managers who work diligently for their employees, shareholders, customers and communities within which they reside. It has been our special mission to encourage and publicize those companies’ sound practices. Invariably, the companies whose managers have the vision to strive for the long term health of their company and its various stakeholders as well as sustainable environmental practices are eager to transmit that information to shareholders and the world at large. It is critical, in our view, to understand the nature and integrity of a company, that information coming from the company give the consumer insight into the overall vision of management and be impeccably accurate. Anything less causes suspicion and concern on the part of the socially responsible investor and should cause concern from all investors. It is tragic, after months of scandal plastered across the media, to hear investors voice deep cynicism about the veracity of corporate statements and reports. We think companies can be and often are better than the picture that has emerged over the past year. It is critical that trust be rebuilt in our system.
Support of Council of Institutional Investors and The Corporate Library Comments
We strongly support the April 15 testimony of Nell Minow of The Corporate Library and the Council of Institutional Investors. We would further suggest on the following:
1. Barriers to shareholder oversight should be eliminated. If a company takes the money of the public, then the public has a right and responsibility to monitor their investment. In the case of fiduciaries held responsible for the savings and retirement funds of others, participation in critical, material decisions concerning the company’s future prospects is an imperative.
a. To further that end, we would urge NYSE to mandate in-person, physical annual meetings.
b. We support suggestions regarding the ability of shareholders to vote all proxies or specifically decline to do so in favor of agents.
c. All agents who vote proxies should be required to disclose their votes.
2. No democracy is effective without education and knowledge on the part of the participant. We urge NYSE to require codes of ethics and to require companies to follow up and monitor compliance. Hollow statements of codes mean nothing. A great deal of investor cynicism has developed around such codes as they have proliferated and served to clothe companies in false “virtuous” personae. Specifically we suggest that NYSE:
a. Require disclosure of the code of ethics in annual reports, waivers in quarterly reports or promptly depending on the issue.
b. Require companies to report on compliance with their internal code annually, by issue.
Support of AIMR Global Task Force on Corporate Governance
We strongly support the comments by the AIMR in support of NYSE proposed guidelines and the issue of investors’ rights and the implied responsibilities of fiduciaries. The AIMR testimony stated,
We believe that institutional investors should play an active role in corporate governance. The fiduciary duty of pension fund sponsors and trustees and mutual fund managers entails duties of care and loyalty to their investors and clients. It entails an obligation to add value to clients’ investments and protect their interests in the long-term health of the companies in which they invest.
1. We agree with AIMR, and also encourage NYSE to mandate reporting that deals with long term issues that might include:
* Compensation policies and their implementation
* The sustainability of the company’s business with regard to natural resource use or its interaction with its various stakeholders. The newly launched Global Reporting Initiative1 provides guidelines for this type of reporting and is supported by hundreds of companies worldwide.
Support of Specific Recommendations
We strongly support the NYSE guidelines around the following:
* Board Independence
* Audit Committee Independence
* Variance among Foreign Private Issuers
* CEO Certification of Investor Information
We respectfully submit the above comments and again thank you for the opportunity to do so.
Joan L. BavariaPresident
Cc: Mr. Gerald M. Levin, Co-Chair, Mr. Leon E. Panetta, Co-Chair, Mr. H. Carl McCall, Co-Chair
1. Global Reporting Initiative, GRI, Launched at United Nations, 2002.