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Joint Chair/CEO – UK shareholders push for change

Two notable shareholder resolutions on both sides of the Atlantic have put the role of UK investors in pressing for change at quoted companies firmly in the spotlight.

Texas Instruments (TI) has come under close scrutiny from RailPEN, the investment arm of the UK’s Railways Pension Fund and one of the UK’s largest pension investors.  Resolution 5 at the upcoming April 16th AGM is requesting that: ” the company establish a policy or amend the corporate bylaws to, whenever possible, separate the roles of chairman and CEO, so that an independent director who has not served as an executive officer of the company serves as chairman. The proposal will not apply to the extent that complying would necessarily breach any contractual obligations currently in effect.

Although not named, except as “The Proponent”, RailPEN has been revealed as the driving force behind the request. According to industry observers US company’s tend to leave out the proponent’s name when they are considered to be a ‘credible investor’.

TI currently combines the roles of Chair and CEO through Rich Templeton who took up the dual role following the retirement of former chair, Thomas Engibous in April 2008. Engibous himself had previously served as CEO so a precedent for the dual roles clearly exists. By US standards TI is not unusual when it comes to combining the roles. Where it does differ, however,  is that the board does not have a designated lead independent director. Instead they operate a meeting-by-meeting rotating lead role which effectively undermines the co-ordinating function the position is designed to foster among the independent directors.

According to Manifest’s US research partners, ProxyGovernance Inc, TI has outperformed its peers over the past five years; the company ranks at the 57th percentile relative to the S&P 1500 compared to peers at the 42nd percentile, but is declining relative to peers at a rate of 2 percentile points per year.

In the UK, Mark’s & Spencer’s Sir Stuart Rose has attracted the attention of the Local Authority Pension Fund Forum (LAPFF).  LAPFF is a membership organisation comprising 49 public sector pension funds which together own over  1% of Marks & Spencer’s.  The members are seeking a commitment from M&S to address their succession plans and appoint an independent chairman by  July 2010. The resolution has been designed to allow shareholders to vote for corporate governance best practice without voting against Rose.

During a conference call announcing their Q4 results, Rose commented on the resolution saying: “I’ll give you the boring answer. M&S is fully aware of its obligations. There’s no new news here, and I’ve got nothing to say,”  Rose is currently scheduled to stand down by July 2011.

Rose’s appointment attracted a significant dissent vote (22% against) at last year’s AGM but Standard Life has come out in favour of Rose’s continued role, provided that the senior independent director and non-executive directors “make sure the current arrangement works effectively” .

What do you think?