NEWS CORPORATION SHAREHOLDER RESOLUTION

RESOLVED:  The shareholders request the Board of Directors to adopt as policy, and amend the bylaws as necessary, to require the Chair of the Board of Directors to be an independent member of the Board. 

Supporting Statement:

Events leading to the closure of News Corporation’s News of the World operations in July have raised investor concerns about the cost—in jobs, reputation, market position, and billions of dollars in enterprise value—of inadequate oversight and maintenance of corporate culture within the company.

The allegations of phone hacking, bribery and more have led to an erosion of public confidence, helped to scuttle a critical business acquisition, and threatened the journalistic reputation and viability of publications critical to News Corporation’s success.

The fact that these revelations took years to uncover and address appear to point to a lax ethical culture within News Corporation and a severe lack of effective review and Board oversight. 

By establishing a separate, independent Chair, the Company can begin to rebuild the public confidence and trust that is so critical to a major news organization. It can also help ensure shareholders that the Board of News Corporation takes seriously the events that have undermined the company’s success and value will be remedied and monitored well into the future.

Failure to identify and manage these emerging risks and the clear need to improve the organization’s capabilities in this regard must be addressed immediately and forcefully in order to protect News Corporation shareholders from further erosion of their investment.

To begin to address these concerns, shareholders call for an independent Chair to improve the board’s oversight of management and risk and strengthen accountability to shareowners.

We believe:

1. The role of the Chief Executive Officer (CEO) and management is to run the company.

2. The role of the Board of Directors is to provide independent oversight of management and the CEO.

3. There is a potential conflict of interest for a CEO to be her/his own overseer while managing the business.

Companies are recognizing increasingly that separating the Chair and CEO is a sound corporate governance practice.  Support for shareholder proposals across the S&P 500 Index averaged 29% in 2010. As of 2009, 21% of S&P 500 companies have an independent board chair, compared with 11% in 2001.

Numerous institutional investors recommend separation.  For example, California’s Public Employees’ Retirement System (CalPERS) Global Principles of Accountable Corporate Governance encourage separation, even with a lead director in place. In the U.K. and other international markets, an independent Chair is the prevailing practice.

Board members have also demonstrated a preference for separation. According to a 2010 corporate governance survey of 400 board members by Sullivan & Cromwell LLP, approximately 70% of respondents believe the head of management should not concurrently be the head of the board.

Yale University’s Millstein Center for Corporate Governance and Performance Policy Briefing paper “Chairing the Board (2009),” argued that overseeing the Board is time intensive whereas a separate Chair allows the CEO to manage the company and build effective business strategies.

While separating the positions of Chair and CEO is not a guarantee against future scandals, it does provide another layer of checks and balances and could improve the board’s ability to oversee the activities of the company. By naming an independent chair, News Corporation can create greater independence and objectivity on the board and promote a coherent, long-term response to the challenge of restoring the company’s reputation.

In response to the phone hacking scandal at News Corp that has come to light this month, CBIS has filed a resolution that asks News Corp to separate the Chair and CEO positions and appoint an independent Chairperson. You can read the full text of the resolution here.

CBIS is working with members of the Interfaith Center on Corporate Responsibility to strategize on ways to influence the company to institute corporate governance reforms. The phone hacking scandal has led to a loss of public confidence in the company, stopped a key business acquisition, and caused serious damage to the reputations of prominent News Corp publications. The events that led to the closure of News of the World demonstrate the financial, legal and reputational risk associated with weak corporate governance structures.

By establishing a separate, independent Chair, News Corp can begin to rebuild the public confidence and trust that is so critical to a major news organization. It can also help ensure shareholders that the board takes seriously the events that have undermined the company’s success and value. While separating the positions of Chair and CEO is not a guarantee against future scandals, it does provide another layer of checks and balances and could improve the board’s ability to oversee the activities of the company. By naming an independent chair, News Corp can create greater independence and objectivity on the board and promote a coherent, long-term response to the challenge of restoring the company’s reputation.

Because News Corp’s filing deadline for traditional resolutions was in May, well before the scandal erupted, CBIS filed this resolution as a “floor resolution.” A floor resolution is a rarely-used innovative mechanism that allows shareholders to bring an issue before the Board, management and investors for debate and a vote. It is raised during the shareholder meeting from the floor the day of the company’s annual stockholder meeting.

CBIS will still have the ability to present the resolution and it will be brought to a vote at the company's annual meeting in October 2011 in New York City. Formally presenting our issue in this way will ensure careful scrutiny by the Board and management. We hope to meet with the company soon to discuss our concerns.

The media has also taken note of CBIS’ action. Our resolution was cited in The Wall Street Journal, Bloomberg, the BBC and others.

Alex Preston

Published 20 April 2011

Alex Preston on the growing profile of sharia-compliant and faith-based investment vehicles.

At the end of last year, Deutsche Bank launched the first European investment product targeted specifically at Christians - a fund linked to the Stoxx Europe Christian Index. It claims to give "faith- and ethics-based investors the flexibility to invest in line with their beliefs" and it excludes companies involved in tobacco, gambling and other potentially suspect pursuits.

Faith-based investing is already well established in the United States, where more than 30 such funds exist and sharia-compliant investment products have been touted as the next big thing in finance for some years now. These religious funds join the growing range of broader ethical investment vehicles that have developed over the past decade to give investors the opportunity to put their money where their morals are.

With the growth of the Middle East as a fin­ancial powerhouse and the increasing importance of local sovereign wealth funds to the global investment markets, sharia banking has become big business. There is already more than $1.2trn invested in banks that comply with strict regulations prohibiting them from either earning or paying interest. Sharia-compliant banking is the dominant form of banking in Iran and it makes up a sizeable share of the market in Malaysia and Saudi Arabia.

Pennies from heaven

Despite the size of the sharia banking and bond markets, complementary investment products have been slow to get off the ground. As Manooj Mistry, UK head of exchange-traded funds (ETFs) at Deutsche Bank, explained to me: "Sharia investing is one of those areas that have received a lot of attention but, in terms of people putting money into products, it hasn't really happened."

The reason for this is clear. For a fund to gain sharia-compliant status, it must screen out any companies that indulge in forbidden ("haram") activities. Conventional banking would come under this interdiction. In Mistry's words: "Professional investors in the Middle East have realised that if you want to screen indexes, you necessarily give up performance profit . . . Are people willing to give up profit in exchange for morality? No, they're not."

The take-up of Deutsche Bank's Stoxx Europe Christian Index ETF has also been slow, with only between €10 and €12m invested since the product was launched in December. This is perhaps understandable. The church pension funds and charitable trusts that are likely to be the fund's main backers are slow-moving, thoughtful investors - and they will want to see evidence of a track record, financial and moral, before they hand over their cash. The fund's returns will be highly correlated with the underlying index, meaning that investors will not have to give up profits to salve their conscience. The exclusion of morally dubious companies will be overseen by the European arm of Christian Brothers Investment Services (CBIS), an American firm that manages $4bn of Catholic investments in the US.

Christian investment in the US relies on two main strategies: avoiding investing in com­panies whose practices are incompatible with basic Christian values and using Christian investors' position as shareholders to change corporate behaviour. I spoke to Daniel Nielsen, director of socially responsible investing at CBIS, to understand how this works.

He acknowledged that a degree of compromise was necessary in choosing which companies to exclude. "If you look to have a completely pure portfolio, you will end up having an empty portfolio," he said. "The threshold can't be set so high that you penalise the investment universe."

CBIS focuses on excluding companies that violate Catholic "life ethics" (through involvement in abortion, contraception and stem-cell research) or are engaged in pornography, tobacco and "militarism". The Stoxx Europe Christian Index ETF also screens out companies involved in gambling, although Stoxx and CBIS will not release the exact rules by which they construct their portfolio. They did, however, reveal to me the largest holding in the portfolio: Nestlé, a company that has been heavily criticised by faith groups for its aggressive marketing of baby formula in the developing world.

Big impact

While some might sneer at the inconsistencies and equivocations of faith-based investing, this segment of the global investment markets is having a disproportionate impact on corporate behaviour. CBIS is one of the larger firms within the Interfaith Centre on Corporate Responsibility, a multi-denominational body that attempts to use its members' pooled funds to force companies to improve their record on matters as diverse as animal welfare, child labour and CEO compensation.

CBIS, Nielsen told me, is involved in a movement to persuade America's largest banks to implement human-rights-based lending - refusing, for instance, to make loans to Sudan until the Darfur conflict is resolved. Christian funds have been at the forefront of pressure on companies such as Coca-Cola and Nike with regard to working practices. Walmart has implemented big changes to its supply chain after engaging with faith-based groups.

For those who find the clash of prayer and profits too jarring, Deutsche Bank now offers a secular alternative to its Christian index. The Global Fund Supporters ETF invests only in corporations that support the Global Fund to Fight Aids, Tuberculosis and Malaria (GFATM), an organisation supported by Bill Gates, Bill Clinton, Bono and Kofi Annan, among others. A portion of the ETF's profits goes to further the work of the GFATM - something, perhaps, we can all believe in.

 

By Avi Salzman

BP (BP) holds its annual meeting this Thursday and some major investors are girding for a fight over the company’s safety record.

Calpers, California’s pension system fund, and the Florida State Board of Administration, which invests for state and local government entities, told the Wall Street Journal that they will vote against approving BP’s annual report and the reelection of Bill Castell, a nonexecutive director who is the  head of the safety, ethics and environment assurance committee. The annual report didn’t discuss the role of the board prior to the April 2010 Macondo oil rig explosion, Calpers spokesman Clark McKinley told the WSJ, and Castell didn’t perform his oversight job well. Calpers owns almost 60 million shares of BP, about 2% of the company’s shares.

The Florida board, which owns 2.35 million BP shares, will also vote against three other directors, in addition to Castell.

The decisions by the two large investors follow a push by a coalition of socially responsible investors, led in the US by Christian Brothers Investment Services and the MMA Praxis Mutual Funds, who have been recommending action against BP. They recommended that investors vote against or abstain from the BP accounts and reports and members of BP’s Safety, Ethics and Environmental Assurance Committee (SEEAC).

“BP has experienced a string of troubles in the U.S., of which the Gulf oil spill is the latest,” said Mark Regier, Director of Stewardship Investing at MMA Praxis Mutual Funds. “In light of the devastating human, environmental and financial impacts these events have produced, we expected to see more than a list of activities. We need to see clear objectives and solid metrics.”

BP didn’t immediately respond to a request for comment.

Friends,
 
On behalf of Julie Tanner (Christian Brothers Investment Services) and myself (Everence Financial/MMA Praxis Mutual Funds), I'd like to draw your attention to the proxy ballot for the BP Annual Meeting, scheduled for Thursday, April 14.   As many of you know, we've been working with an international coalition of institutional investors to help hold BP accountable following the Gulf Oil Spill.  This coalition has issued the press release and assessment of BP's annual report (attached) seeking to draw attention to a growing movement among concerned institutional investors to cast votes on the BP proxy that demonstrate continuing dissatisfaction with the company's safety and risk management, means and metrics for evaluation, plans for transition to a low-carbon economy and board oversight. 
 
While--as can be expected--the major proxy voting agencies have recommended different votes on various items on the BP ballot, the international investor coalition is supporting votes against or abstaining from BP's annual accounts and reports.   In addition, we recommend considering:

·         voting against/abstaining from the chair of the board Safety, Ethics, and Environmental  Assurance Committee or SEEAC (Castell)
·         voting against/abstaining from various members of SEEAC (Carroll, Burgmans).
·         voting against/abstaining from the remuneration proposal
·         voting against/abstaining from BP Board Chair (Carl-Henric)
 

For those subscribed to ISS (standard or social) it is particularly important to review as both are recommending FOR the Accounts and Reports.
 
We also have our first taste of press interest in this movement, see WSJ article "BP to Face Investors' Wrath at Shareholder Meeting via the link below:
http://online.wsj.com/article/SB10001424052748703712504576244990369064286.html