Risk & Governance Weekly

In Brief

Harbinger Wins Three Board Seats at Media General

Hedge fund Harbinger Capital Partners won three seats on Media General’s board at the publishing-and-broadcasting company’s April 24 annual meeting.

The dissident nominees, who were backed by Media General’s largest shareholder, Gamco Investors, received at least 57 percent support, Harbinger spokesman John Dillard told Bloomberg News. The dissidents won’t have control of the board, as six board members are elected by the family of Chairman John Stewart Bryan III. The Richmond, Va.-based company owns 23 television stations as well as newspapers in Richmond and Tampa.

Harbinger’s victory at Media General is noteworthy as most U.S. proxy fights are settled prior to a vote. Dissident investors also prevailed at restaurant chain Steak N Shake where shareholders elected two candidates nominated by the Lion Fund in March. During the first quarter of this year, 30 companies, including well-known firms like Motorola and the New York Times Co., gave seats to dissidents to avert proxy contests, according to The Wall Street Journal. The Times Co., which was also challenged by Harbinger, agreed to give two seats to dissident candidates.

It appears that 2008 will be another record year for proxy fights. According to FactSet Research Systems, 152 new activist campaigns were announced during the first quarter. On June 25, railroad firm CSX will face a challenge from The Children’s Investment Fund, a U.K.-based hedge fund. --Ted Allen

AFSCME Calls on Two WaMu Directors to Step Down

The American Federation of State, County, and Municipal Employees is asking for the resignation of two directors, James Stever and Charles Lillis, at Washington Mutual.

According to preliminary tallies, Stever and Lillis received 42.3 and 40.8 percent opposition, respectively, at WaMu’s April 15 annual meeting. The CtW Investment Group, which has already encouraged Stever and Lillis to resign, said in an April 17 letter to the board that both would have failed to win re-election if broker votes had been excluded from their vote tallies. Another director, Mary E. Pugh--who chaired the finance committee at WaMu--received 49.9 percent opposition at the meeting and resigned from the board shortly thereafter.

In an April 28 letter to Chairman and CEO Kerry Killinger, AFSCME President Gerald McEntee reiterated claims that Stever and Lillis would not have been re-elected if the New York Stock Exchange had been permitted by the Securities and Exchange Commission to disallow broker votes in director elections. “Any failure by Washington Mutual to act in response to a majority withhold vote for a director suggests a board culture that is not accountable to the owners of the company,” McEntee wrote.

WaMu incurred significant shareholder discontent this year after the board made a decision not to factor in subprime-related losses--which amounted to $1.53 billion in the fourth quarter last year and $1.14 billion in the first quarter of this year--when calculating bonus payments for Killinger and many other top company officers. Killinger announced at the annual meeting that the company would reverse this decision, saying the human resources committee would consider “credit-related targets" in determining executive bonuses. WaMu did not respond to calls for comment by press time.

McEntee has also urged the company to calculate final voting tallies and release them to shareholders in advance of its next quarterly regulatory filing. Subprime-affected financial firms that have declined to release vote totals before their next quarterly filings include Bank of America and Citigroup–where investors say at least one director received 33 percent opposition. –L. Reed Walton

Rockefeller Family Pushes for Change at ExxonMobil

Descendents of John D. Rockefeller, founder of the oil company that eventually became ExxonMobil, are calling on the firm to make governance changes and invest in renewable energy.

According to The New York Times, 15 family members are involved in putting forward four shareholder resolutions at the Irving, Tex.-based company’s May 28 annual meeting. Proposals co-sponsored by Rockefeller family members call for reports on how global climate change affects developing countries as well as a report on progress toward greenhouse gas emissions reduction, and a call for a renewable energy research policy. The family is also asking the company to establish an independent board chairman. The positions of board chair and CEO are now held by Rex Tillerson.

An independent-minded board chair could “substantially improve Exxon's ability to look the future squarely in the face and will increase its flexibility,” Peter O’Neill, head of the Rockefeller family committee and John Rockefeller’s great-great-grandson, told the Dallas Business Journal. O’Neill told the Associated Press that the resolution had the support of over 80 percent of Rockefeller descendents over the age of 21.

John Rockefeller’s great-granddaughter, Neva Rockefeller Goodwin, who is sponsoring the climate change report resolution, said the company is also failing to innovate. “Part of John D. Rockefeller’s genius was in recognizing early the need and opportunity for a transition to a better, cheaper, and cleaner fuel,” Goodwin told the Times.

In its proxy statement, ExxonMobil management opposes all four family-supported proposals, as well as 13 other shareholder resolutions. In response to the independent chair measure, the company argues that the decision of whether to split the roles of CEO and chairman should be left to the board. --L. Reed Walton