Giving talks at Stanford & Berkeley

I’ve recently scheduled to give these three talks:

Nov. 16 at Stanford Law School’s Rock Center for Corporate Governance, mainly on the paper “Proxy Voting Brand Competition”, my work on the SEC Investor Advisory Committee, and ProxyDemocracy.

Nov. 17 at U C Berkeley’s Institute of Governmental Studies, mainly on the paper “Global Voter Media Platform” and VoterMedia.org.

Dec. 10 at the 2009 British Columbia Pension Forum, mainly on the paper “Proxy Voting Brand Competition”, my work on the SEC Investor Advisory Committee, and ProxyDemocracy.

More info on the talks at votermedia.org/presentations. The papers are available at votermedia.org/publications.

SECIAC meetings: videos & minutes

The SEC Investor Advisory Committee web page has links to videos and minutes of our meetings (+ other info). Videos for the 2009-07-27 meeting and the 2009-10-05 meeting have been posted. Minutes for 2009-07-27 are posted, but not for 2009-10-05 yet.

If you’d like to see where on each video I spoke up, here are the times and summaries of what I said:

2009-07-27 video 1 (morning):

0:35:25 I introduced myself — my background and some views on investor education.

1:52:34 I suggested consideration of an investor education pilot program using a competitive voting system to allocate public funds.

2009-07-27 video 2 (afternoon):

0:15:00 I agreed with Mr. Salisbury that our advice should take into account other existing and proposed investor education initiatives.

0:41:12 I described new tools for individual investors to vote by copying the votes of institutional investors, being developed by ProxyDemocracy, a non-profit group at which I serve as a director. I noted that newcomer MoxyVote plans to offer something similar.

0:57:45 I suggested that shareowner resolutions relating to auditor selection should not be deemed ‘ordinary business’ and thus excludable from the proxy. I noted a parallel with director elections, which are now being considered fair game for shareowner involvement.

2009-10-05 video 1 (morning):

2:52:40 I suggested that our ability to submit both majority and minority views as advice to the SEC makes the proposed recusal policy less necessary.

SECIAC Members, Subcommittees & Constituencies

Here is a list of the SEC Investor Advisory Committee members, our subcommittee assignments, affiliations, and constituencies that (according to SEC staff) we represent:

		Subcommittees
FirstName	LastName	Education	Purchaser	Owner	Title	Organization	Representing
Mark	Anson		1	1	President and Executive Director of Investment Services	Nuveen Investments	institutional and high net worth clients
Jeff	Brown	1	1	1	Senior VP, Office of Legislative & Regulatory Affairs	The Charles Schwab Corporation	from a regulatory and customer-service perspective, providers of tools to retail investors who elect to make their own investment decisions
Mercer	Bullard		1		Founder	Fund Democracy	individual mutual fund investors
Hye-Won	Choi	1		1	Senior VP & Head of Corp. Governance	TIAA-CREF	those involved in retirement planning for investors who work in academic, medical, cultural and research institutions
Stephen	Davis			1	Executive Director, Millstein Center for Corporate Governance	Yale University School of Management	international institutional investors
Abe	Friedman	1		1	Managing Director	Barclays Global Investors	very large global institutional investors
Mac	Hisey	1	1		President	AARP Financial Inc.	senior investors
Mellody	Hobson	1			President	Ariel Investments	smaller, as well as minority-owned, institutional investors
Dennis	Johnson	1		1	Managing Director	Shamrock Capital Advisors	hedge funds
Fred J.	Joseph	1	1		Colorado Securities Commissioner & Acting State Bank Commissioner	Colorado Department of Regulatory Agencies	State Securities Regulators
Adam	Kanzer			1	Managing Director & General Counsel	Domini Social Investments	social investors
Mark	Latham	1		1	Executive Director	VoterMedia.org	individual investors, particularly with respect to their role in corporate governance
Barbara	Roper		1		Director, Investor Protection	Consumer Federation of America	individual investors, with a particular focus on investor protection
Dallas	Salisbury	1	1		President and CEO	Employee Benefit Research Institute	individual investors, especially with respect to employee retirement issues
Kurt	Schacht		1		Managing Director	CFA Institute	investment professionals
Damon	Silvers			1	Associate General Counsel	AFL-CIO	institutional labor investors
Kurt P.	Stocker	1		1	Member of the Board	NYSE	individual investors
Ann	Yerger			1	Executive Director	Council of Institutional Investors	pension funds and those who depend upon them
Total #:	18	10	8	11	[Subcommittee chairs flagged in bold red]

SECIAC Meeting Notice for October 5, 2009

Today I noticed that the public announcement of our next meeting has been posted on the SEC Investor Advisory Committee spotlight page.

It starts at 9 a.m. EST, is open to the public (and will be webcast) except for 2 hours when we’re in subcommittees (probably noon to 2 pm). It should end about 5 pm.

“The agenda for the meeting includes: (i) a presentation by SEC staff of potential Commission initiatives; (ii) description of the composition and purpose of the Committee’s subcommittees; (iii) consideration of a Committee recusal policy; (iv) reports from the Committee’s subcommittees; and (v) discussion of next steps for the Committee, including regarding SEC resources.
DATES: Written statements should be received on or before September 28, 2009″

Instructions for submitting statements are in the announcement.

SEC Investor Advisory Committee creates 3 subcommittees

From today’s SEC press release:

An Investor Education Subcommittee chaired by Dallas Salisbury (President and CEO, Employee Benefit Research Institute) plans to focus on matters related to financial literacy, the efficacy of layered educational resources that may permit investors to access information at varying levels of detail reflecting their needs, the ways that issuers and boards of directors communicate with investors, and the types of technology that can be utilized for education.

An Investor as Purchaser Subcommittee chaired by Mercer Bullard (Founder and President of Fund Democracy, Inc. and Associate Professor of Law, University of Mississippi School of Law) expects to examine the needs of investors when they purchase specific products (mutual funds, hedge funds, money market funds) and services (brokerage, investment advisory, and financial planning). This subcommittee also will consider the fiduciary duty owed to investors by those who provide investment advice, as well as issues related to pre-sale and other disclosure, intermediary fees and compensation practices, arbitration, and technology.

An Investor as Owner Subcommittee chaired by Stephen Davis (Executive Director of Yale School for Management’s Millstein Center for Corporate Governance, and board member of Hermes Equity Ownership Service) intends to review proxy solicitation and disclosure issues, proxy voting and process (including the role of proxy advisory firms), majority voting, Regulation FD, executive compensation practices, the responsibilities of shareholders, international issues, and technology related to shareholder communications and voting.

The SEC’s Investor Advisory Committee plans to hold its next meeting in early October.

A new Web page with more information about the work of the SEC’s Investor Advisory Committee is available at http://www.sec.gov/spotlight/ investoradvisorycommittee.shtml.

I’ve volunteered for Investor Education and Investor as Owner.

Vote to allocate investor education budget

I write two blogs, and their topics overlap somewhat. (The other is VoterMedia Democracy Blog.) This post is an example of that overlap.

Both blogs relate to the website VoterMedia.org, which is a political reform project that focuses on the economics of information that flows to voters, in corporations and in democracies.

I propose that voters in each community (corporation, city, country, labor union etc) vote to allocate a budget among competing information providers. These would be something like proxy advisors for corporate shareowners, and political media & think tanks for democracies. For smaller voter communities like student unions, the advisor/info role would often be filled by bloggers.

I first proposed this for corporations in 1988, and published it in 1997 (and later) — see votermedia.org/publications. I submitted it as a shareowner proposal many times, some of which are listed at votermedia.org/proposals. Management of course opposed it, but I was disappointed in the lack of support from institutional investors.

So I expanded my scope to democracies, wrote some papers about how to apply the idea there, and sponsored several test implementations in the last few years, especially at the University of British Columbia’s student union and in Vancouver city politics. I explain the idea and test results in the paper Global Voter Media Platform, along with a plan for the website which we are now building. See also our FAQ page.

Thinking about the issues we are facing in the SEC Investor Advisory Committee, I found myself reacting to the problems of disclosure requirements, especially disclosure to retail investors, e.g. when buying mutual funds. It’s so hard to control the behavior of people who make money from investors. But a well-designed investor information/education system should be able to effectively empower individuals to make better investment decisions.

The economics of such an information system are similar to the economics of voter information systems. There’s a large shared public interest component of such a system, which private markets do not fulfill very well. But allocation and oversight of public funding is often inefficient and ineffective, so we end up with poor information systems. The voter funding allocation system I’ve proposed could be applied to investor education too.

So I recently added a page for that to our new website — see votermedia.org/communities/223-usa-investor-ed. For now, the whole website is in public test mode. There’s no funding yet. Anyone can vote, with or without a login. So far I’ve just told a few colleagues about this new page, so the votes are too heavily weighted toward Proxy Democracy (where I’m on the board). Feel free to vote and tell others, to balance this out! (Also see example pages for Vancouver and UBC.)

SECIAC July 27 meeting agenda

The first meeting of the SEC Investor Advisory Committee is next Monday. Here’s an excerpt from their Notice of Meeting, which is linked from the SECIAC Spotlight page:

The Securities and Exchange Commission Investor Advisory Committee is providing notice that it will hold a public meeting on Monday, July 27, 2009, in the Auditorium, Room L-002, at the Commission’s main offices, 100 F Street, NE, Washington, DC.  The meeting will begin at 10:00 am (EST) and will be open to the public. The meeting will be webcast on the Commission’s Web site at www.sec.gov.

Here’s the latest agenda I’ve received (as of 2009-07-13):

Open Meeting of the Securities and Exchange Commission
Investor Advisory Committee

Location:    SEC Headquarters
Auditorium, Room L002
Washington, D.C.

Date:        Monday, July 27, 2009

Time:        10:00 A.M.

Agenda

9:00 – 10:00 a.m.         Informal Breakfast

10:00 – 10:30 a.m.    Opening Remarks, Commissioner Luis A. Aguilar; Opening Remarks, Committee Co-Chairs Richard (Mac) Hisey and Hye-Won Choi

10:30 – 10:50 a.m.    Introduction of Committee Members and Supporting Staff

10:50 – 12:00 p.m.    Committee Agenda and Organization

12:00 – 1:00 p.m.    Lunch and Discussion of Administrative Issues

1:00 – 3:00 p.m.    Investor Views of Possible Refinements to the Disclosure Regime

3:00 – 3:45 p.m.    Next Steps:  Confirm Dates for Future Meetings and Discuss Prioritization of Issues

3:45 p.m.    Adjournment

I’ll be in DC until late afternoon Tuesday July 28, and still have some times available to meet people from 12:30 to about 3 pm that day (email mark[at]votermedia.org).

Issues for SEC Investor Advisory Committee to address

Last week the SEC asked Committee members to email them issues that each of us would like to see the Committee address in the next 2 years. Here’s what I suggested:

1. How to encourage and support proxy voting by individual investors:
- Encourage development of information infrastructure (mainly private sector websites) that will help individuals vote intelligently.
- Develop educational program that would be posted on the SEC website and would be widely distributed through brokers, AAII, AARP, Investor Protection Trust, 401(k) plans, etc. that explains the importance of proxy voting, how it relates to corporate governance, and how it provides an opportunity to influence both the earning power and social/environmental values of companies.

2. Disclosure of proxy votes by institutional investors:
- Require XBRL format.
- Require disclosure by pension funds.
- Encourage disclosure prior to annual meeting.

3. Review the integrity of the proxy voting process to ensure it truly reflects the wishes of the electorate:
- Get rid of “blank vote” mechanisms (where votes are filled in on blanks left by shareowners), share lending that may extend to votes, etc.

4. Auditor selection:
- Allow shareholder proposals that relate to auditor selection; up to now, companies are allowed to exclude such proposals under rule 14a-8(i)(7), as relating to “ordinary business matters”. Reasons for changing this are similar to reasons for allowing proposals that relate to director elections (http://www.sec.gov/news/press/2009/2009-116.htm). These matters are crucial for management accountability to shareowners.

So yesterday I was happy to see a comment submitted by the Investment Company Institute (most of whose members are mutual funds) that included this recommendation, which overlaps with my suggestion #2 above:

To the extent that the Committee believes that proxy vote disclosure achieves important public policy purposes, we urge it to support our recommendation to extend such disclosure to all institutional investors.

By the way, I welcome comments on this blog!

I Represent Individual Investors

The letter from SEC Chairman Mary Schapiro appointing me to their Investor Advisory Committee (SECIAC) specifies that I “have agreed as a member of the Committee to represent individual investors, particularly with respect to their role in corporate governance.” I am pleased to have this mandate, which I no doubt share with some other Committee members, although I haven’t seen a list of their mandates yet. Each member brings a different background and expertise to the group, a diversity that should greatly benefit our work. I hope our biases balance out well enough to serve the public interest.

I am also pleased to see some thoughtful public comment on this important issue of the Committee’s composition. The first comment in particular stands out for me:

June 3, 2009

Ms. Shapiro,

I write today with the due respect toward your intentions:

U.S. SEC SAYS CREATING INVESTOR ADVISORY COMMITTEE “TO GIVE INVESTORS A GREATER VOICE” IN AGENCY’S WORK Wednesday, June 03, 2009 10:14:03 AM (GMT-07:00)

NEW SEC ADVISORY COMMITTEE MEMBERS INCLUDE REPRESENTATIVES OF AFL-CIO, COUNCIL OF INSTITUTIONAL INVESTORS, CHARLES SCHWAB, BARCLAYS Wednesday, June 03, 2009 10:15:48 AM (GMT-07:00) Provided by: Reuters News

But, as an individual investor, I do not feel these institutions are advocates for me. Like most Americans, I am not a union member, and the interests of the other three would seem to be those of the securities industry, which are often at odds with the interests and protection of the individual investor.

Would you please consider adding to the Investor Advisory Committee at least one true, strong advocate for the individual investor? Thank you.

Sincerely,
Brian Harris

I hope Mr. Harris has now seen the complete list of SECIAC members, and is somewhat reassured by the inclusion of several people who can be expected to advocate for individual investors. Another commenter (Dan Calabria, July 14, 2009) mentions two of them but is still understandably concerned about whether that will be a strong enough voice:

… with the exception of Ms. Barbara Roper (Consumer Federation of America) and Dallas Salisbury (Employee Benefit Research Council), which of the remaining 13 committee members could conceivably be described as anything remotely resembling an investor advocate?

So let me try to add some reassurance about my own loyalty to individual investor interests. A first glance at my résumé might raise some concerns, especially the part about derivatives arbitrage. Isn’t that synonymous with evil? But the plus side is that I know something about it.

If you look deeper into my publications though, you’ll find this quote in “The Internet Will Drive Corporate Monitoring”:

Using the internet for shareowner proxy voting will not just save money.  It will awaken
the sleeping giant of corporate governance — individual investors.  It will give
shareowners unprecedented influence over the policies of large corporations, by making
“corporate monitoring” possible.  Rational voter apathy will be counteracted by the
internet’s ability to make information exchange cheap and easy.  Likely benefits include
higher profits, support for social goals, and more realistic levels of CEO pay.

Since publishing that article in 2000, I have advocated steadily for corporate governance reforms that will empower investors, especially individual investors. (Also voters in democracies, but that’s a broader story.) You can browse my other publications for evidence of this, especially “Proxy Voting Brand Competition”. I have submitted many shareowner proposals to corporations, pushing for such reforms, which have been consistently opposed by management and voted down by institutional investors. I had those posted at votermedia.org until the recent beta release of our Global Voter Media Platform, and will repost them soon. [2009-07-21: Some are now posted at votermedia.org/proposals; will post more there soon.]

Another specific example of advocacy for individual investors is my activity as a member of the International Corporate Governance Network, whose members are mainly but not exclusively institutional investors. I promoted my reform proposals to its members from 1999 to 2007. Here’s an email I sent to the ICGN Chairman:

From: Mark Latham
Sent: Tuesday, August 26, 2003 10:23 AM
To: Alastair Ross Goobey
Cc: Peter Dey; Pierre-Henri Leroy; Christine Mallin; Nell Minow; Robert A. G. Monks; Ariyoshi Okumura; Taiji Okusu; Raj Thamotheram; Caroline Phillips; Sheila Doyle
Subject: What ICGN has been missing

Dear Mr. Goobey:

Thank you for raising the question (in the July 2003 ICGN business meeting) of what issues or ideas the ICGN may be missing.  I spoke from the floor in response, and am writing now to make sure my suggestions are conveniently available for reference.

I would like to make two suggestions:

1. Amend the recently circulated ICGN meeting minutes’ item #7 by changing:
“Action institutional investors can take to help individual investors.”
to become
“Action institutional investors can take to help individual investors vote their shares.”
(I think this would be a more descriptive summary of what I said.)

2. Consider this issue for inclusion in the program of ICGN’s 2004 annual conference:

Now that internet voting has been implemented for most USA companies, shareowners can break the board of directors’ monopoly on providing convenient guidance to individuals on how to vote their shares.  We can do this by building a website giving individuals such options as “Vote all my stock the same way CalPERS votes its stock.”  One of the many potential benefits would be to reduce the amount of individual stockholdings voted by brokers.

A detailed exposition of this idea is in my paper “Vote Your Stock” on the web at www.corpmon.com/publications.htm

I hope you will forward this suggestion to the 2004 conference program committee.  Several active ICGN members know about my work on this topic, and could perhaps help decide whether it merits inclusion.  They are cc’d on this email: Peter Dey, Pierre-Henri Leroy, Christine Mallin, Nell Minow, Robert A. G. Monks, Ariyoshi Okumura, Taiji Okusu and Raj Thamotheram.

Also for your reference on my background, my resume is on the web at www.corpmon.com/MLresume.htm

Thanks again for considering these suggestions.

Sincerely,
Mark Latham

I never saw this issue on any ICGN conference program since then, until I stopped renewing my membership in 2007. But this reform is now finally starting to happen, thanks mainly to a nonprofit organization called ProxyDemocracy, founded by Harvard PhD student Andy Eggers, who heard me present the idea at the 2003 International Anti-Corruption Conference organized by Transparency International. The SEC’s requirement (since 2004) for mutual funds to disclose their proxy votes has also been a great help.

I’m on the SEC Investor Advisory Committee (SECIAC)

The U.S. Securities & Exchange Commission today announced the formation of an Investor Advisory Committee to give them investor perspectives on SEC policies. I am one of the committee’s 18 members — see SEC press release. They will fly us to DC 3 or 4 times a year for one-day meetings.

I look forward to working with this expert group, and will do my best to contribute to improving securities regulation, corporate governance and our economic/political system.