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Comptroller William C. Thompson, Jr. today issued his annual report detailing the results of shareholder resolutions filed on behalf of the New York City Pension Funds during the 2006 proxy season.

During that period, the Comptroller filed 21 different types of resolutions with 92 companies on corporate governance and social and environmental issues.

“I am very pleased with the results of our 2006 initiatives. I congratulate the trustees of our pension funds for having approved our comprehensive program of corporate governance and corporate social responsibility reforms,” Thompson said. “I applaud the boards of directors of the companies who agreed with, and adopted, our proposals. I believe that they understand clearly, as we do, that these reforms are needed to bolster investor confidence in the market and corporate boards, to promote long-term, sustainable profitability of their companies, and to enhance the investment interests of their shareholders.”

The measures were filed on behalf of the: New York City Employees’ Retirement System, Teachers’ Retirement System of New York  City, New York City Police Department Pension Fund, New York City Fire Department Pension Fund, and New York City Board of Education Retirement System.

Corporate Governance Proposals

In 2006, Thompson submitted shareholder proposals seeking nine specific corporate governance reforms to 20 companies.

The proposals sought the following reforms: that corporate boards of directors adopt stronger criteria of director independence for members of their audit and compensation committees; that boards of directors establish a board protocol to effectively and fairly address shareholder proposals that win majority votes; that in the event a company has to restate its financial report, its board of directors would review and recoup awards and bonuses that were granted to executives based on  incorrect data; that the classified structure of corporate boards of directors is repealed and all directors are elected annually; that a significant portion of future stock option grants to senior executives are performance-based; that corporate boards establish a mechanism for direct communications between directors and shareholders; that the selection of a company’s independent, outside auditors is presented to the shareholders for ratification; and that companies amend their by-laws to establish a majority vote standard in director elections.

Several highlights:

• Two companies, Unumprovident Corp. and Newell Rubbermaid, adopted the proposal which requested board adoption of a protocol for acting on shareholder proposals that win majority votes. The proposal was supported by 36.6% and 37.4% at ICOS Corp. and BEA Systems, respectively.

• The proposal to repeal the classified board structure and establish annual elections of directors was adopted at Level 3 Communications; and won majority votes of 79.5%, 72.7%, 83%, 84% and 75% at Convergys Corp., ICOS Corp., Newell Rubbermaid, King Pharmaceutical, and BEA Systems, respectively.

• One company, Millennium Pharmaceuticals, adopted the proposal which called for a significant portion of future stock option grants to senior executives to be performance-based.

• Janus Capital Group and Agilent Technologies agreed to amend their by-law to establish a majority vote standard in director elections.

Social and Environmental Responsibility Proposals & Significant Results

In the category of corporate social and environmental responsibility, Thompson submitted proposals to seventy-two companies on thirteen specific issues. The proposals sought some of the following reforms: an investigation into alleged violence against union officials and employees at a company’s affiliate; prohibitions of discrimination based on sexual orientation and gender identity; disclosure of cost-effective ways to reduce carbon dioxide and other emissions from power plant operations due to potential risks associated with climate change; and implementation of the MacBride Principles, a set of guidelines designed to establish justice and equality in the workplace.

Several highlights:

• One resolution requested that companies implement the International Labor Organization (ILO) Human Rights Conventions and UN Human Rights Norms in their international operations, and allow for independent monitoring of compliance. This proposal received an unprecedented high level of shareholder support-- 49.8% of the total votes cast for and against-- at Lear Corp.

• A proposal that requested companies to issue an annual sustainability report was adopted by H.J Heinz and National Semiconductor; and won unprecedented shareholder support of 48.4% of the total votes cast for and against at TEREX, and 33.9% at Dean Foods.

• The funds’ proposal which called for the adoption of an explicit prohibition against discrimination based on sexual orientation was adopted by GenCorp Inc., Paccar, Baldor Electric, General Dynamics, and Parker Hannifin.

• A related proposal, which called for the implementation of non-discrimination policies for gender identity based on the Equality Principles—10 inclusive, non-discrimination principles that, among other provisions, call for equal employee benefits irrespective of sexual orientation and gender identity, was adopted by three companies — DTE Energy, Wendy’s International and ONEOK.

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