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Harnessing Public Pension Power . Using Corporate Governance to Protect Fund Assets During a Time of Economic Crisis. Greg A. Kinczewski Vice President/General Counsel Marco Consulting Group. NCPERS 2009 Public Safety Conference. Horrible Last Two Years. Worst Recession Since 1930s - PowerPoint PPT Presentation
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Harnessing Public Pension Power
Greg A. KinczewskiVice President/General Counsel Marco Consulting Group
Using Corporate Governance to Protect Fund Assets During a Time of Economic Crisis
NCPERS2009 Public Safety Conference
2
Horrible Last Two Years Worst Recession Since 1930s
$15 Trillion Lost From American Economy
$1 Trillion From State and Local Benefit Fund Equity
Unemployment At 26-Year High
S&P 500 Drops 55.3%
NY Financial Brokers Lose $35 Billion
How Has Wall Street Reacted?
4
How Has Wall Street Reacted?
$18.4 Billion in 2008 Bonuses
Sixth-Highest in History
5
How Has Wall Street Reacted? Goldman Sachs 2008:
− Earnings: $2.3 billion− TARP Funds: $10 Billion− Bonuses: $4.8 billion
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How Has Wall Street Reacted? Morgan Stanley 2008:
− Earnings: $1.7 billion− TARP Funds: $10 billion− Bonuses: $4.475 billion
7
How Has Wall Street Reacted? J.P. Morgan Chase 2008:
− Earnings: $5.6 billion− TARP Funds: $25 billion− Bonuses: $8.6 billion
...They At Least Had Earnings
9
American International Group $170 Billion Bailout by U.S.
Prevents Bankruptcy
$1 Billion in Retention Bonuses 2008-2009− $450 Million to Financial
Derivatives Unit That Collapsed Economy
− One-Third Returned After Public Furor
− Dozen Employees Resign
10
Merrill Lynch Bank of America Buys at Bargain
Price in December, 2008− Merrill Lynch lost $25 Billion in
2008− Fourth Quarter Loss of $5 billion
Greater Than Anticipated− BofA Says No Bonuses to Merrill
Lynch Without Its Approval in Acquisition Proxy
− BofA Already Authorized Bonuses of $3.6 Billion to Merrill Lynch
− SEC Sues BofA For Failure To Disclose Bonuses
$33 Million Settlement Judge Rejects, Trial Set for
February 1, 2010
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NCPERS Members File 2009 Proposals The Kansas City Firefighters, Miami Firefighters, and Philadelphia
Public Employees Filed Shareholder Proposals In 2009 To Curb Corporate Excesses
Easy To DoEligibility: Own $2,000 of Stock Continuously for Two Years− Cost: Minimal− Key: Support From Other Institutional Investors
And Effective
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2009 Shareholder Proposals On Independent Compensation Consultants
Shareholder Approval of Golden Coffins
Say on Pay
Disclosure and Board Oversight of Political Contributions
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Independent Compensation Consultant
Independent Compensation Consultant Policies Adopted By:− Johnson & Johnson− Metlife
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Approval of Golden Coffins
Shareholder Approval of Golden Coffins Adopted By:− Occidental Petroleum
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Pay Proposal
Shareholder Say on Pay Proposal− Receives 53% at Pulte
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Disclosure and Board Oversight of Political Contributions
Disclosure and Board Oversight of Political Contributions− Receives 41% at Citigroup
17
NCPERS Members Planning Proposals NCPERS Members Planning
Proposals in 2010− Say on Pay ?− Bonus Banking− Asymmetrical Pay− No CEOs on Compensation
Committees− Independent Chairman of Board
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Make Sure Your Votes Are Being Cast Right Way on Those Proposals Have A Proxy
Voting Policy
Direct Your Proxy Voting Agent
Consider Cosponsoring Proposals
Make Sure Your Own House in Order
20
Best Governance Practices Governance Principles
Risk Management Approach
Investment Policy Statement
Forward Agenda
Annual Board Self-assessment
Key Performance Measures − Administrative Objectives − Investment Oversight − Member Services− Regulatory Compliance
Questions