OVERVIEW
PAPERS
LONGVIEW SHAREHOLDER INITIATIVES
In recent years, corporate governance has attracted public interest because of its importance for the economic health of corporations and society in general. Governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance. Contemporary notions of corporate governance encompass shareholder democracy: that is, the ability of firm's owners to have a voice in the management of its investments.
Corporate governance can be defined narrowly as the relationship of a company to its shareholders, or more broadly, as its relationship to society. The LongView Funds take this broader view, recognizing that the promotion of fairness, transparency and accountability extends beyond corporate headquarters to the role that industry plays in labor, environmental and policy issues around the world. High employee turnover, inadequate employee incentives, lack of community goodwill due to human rights abuses or environmental degradation, labor disputes, and an unstable political climate can impact share price. Further, LongView supports the idea that sustainable workforces and markets are required for stable economic growth, which is not possible in the absence of safeguards to hold industry to ecological and social principles.
The LongView Strategy
Unlike other investment managers, Amalgamated Bank realizes that in order to maximize long-term shareholder value, traditional investment strategies are not enough. That's why we have chosen a program of vigorous, consistent and aggressive shareholder activism, a feature that distinguishes LongView among its competitors.
LongView closely monitors publicly-traded companies that comprise its equity index funds. The Fund seeks out underperformers and identifies best practices in corporate governance and social responsibility that could potentially increase long-term profitability. Based on this research, we submit shareholder proposals and communicate with corporate executives and board members to pursue the Fund's objectives.
Unlike other investment funds that have traditionally voted with company management by default, LongView actively votes its proxy ballots. Without this level of monitoring, corporate executives may act in their own self-interest at the expense of shareholders, employees and the wider communities. Holding management and boards accountable to governance best practices can make them more attentive to the long-term interests of investors like us.
Several years ago, Fortune magazine published its prescription for restoring shareholder confidence in Corporate America. Among the issues identified by Fortune for reform were many LongView has targeted for over a decade, from excessive executive compensation to lack of director independence. But the magazine's ultimate prescription was simple: "Shareholders should act like owners." Institutional shareholders like Amalgamated Bank own 44 percent of the stock market. "With power like that," said Fortune, "real reform is only a proxy vote away." LongView takes that power and harnesses it for the benefit of shareholders, workers and society.
Blazing a Path
Good corporate governance is crucial to shareholder value and corporate viability. LongView has blazed a trail for other investors to follow and has provided a voice for governance best practices that are heard at annual shareholder meetings, in the corporate boardroom and within public discourse.
Each year we lead the community of activist institutional investors on a wide variety of issues and file shareholders proposals as a means of providing a voice to worker's interests and shareholder rights. As one of the world's most active investors, we enact measures to:
- Ensure that independent directors, that is, directors who are not also company executives or have other links to the company, occupy key committees.
- Require that each board member face election annually.
- Monitor excessive executive compensation and executive compensation tied to performance.
- Seek to protect workers and shareholders from the impact of highly-leveraged and speculative takeovers, which can result in negative effects, including unnecessary job loss.
- Internalize social responsibility into corporate governance by requiring companies to routinely examine their labor standards and implementation, equal opportunity, human rights and environmental issues.
- Scrutinize accounting practices, recognizing that the very foundation of capital markets is corrupted when investors cannot trust corporate financial statements.
In the past year, more companies than ever responded to LongView shareholder proposals by instituting reforms. More and more shareholders are pushing for improved corporate governance through their proxy votes; and companies have begun to respond. Through its LongView funds, Amalgamated Bank continues to fulfill its commitment to the working people of this country and the unions that represent them.
