The institutions, representing the pension savings of some 15 million individuals globally, called for fundamental reforms as a means of restoring investor trust in the integrity of US capital markets and public corporations. The reforms include:
- Shareowner access to proxy voting
- Standard majority voting for election of corporate directors
- Transition to independent board leadership with split chair/CEO roles
- Advisory shareholder votes on executive remuneration
- Repeal of the authority for brokers to vote un-instructed shares
- Stronger rules on clawing back illicit executive compensation
- Limits on the use of conflicted remuneration consultants
- Restrictions on severance payments rewarding poor performance
The letter, signed by representatives of 28 investors, including UK, European and other international institutions, recognises that practices in the US and other major markets influence each other, and notes that “because practices in other markets have been improving, investors have begun to re-evaluate the relative investment risks presented by corporate governance practices in the United States. To remain competitive in this environment, we believe the United States must promptly embrace the reforms we have identified.”
The signatories also called for the process of reform to be led by an appropriate US government entity, with the goal of implementation of a best practice “comply or explain” disclosure requirement in 2010.
One of the signatories, Peter Moon, Chief Investment Officer of the UK Universities Superannuation Scheme (USS) said:
“The US has a system of corporate governance in which there is a misalignment between the interests of shareholders and directors. It is critical that the new administration understands that this has ramifications for how overseas investors view the integrity of the US markets. We are therefore calling for the necessary reforms to be made to ensure that confidence in the US market is restored.