WHEREAS many shareowners lack the time and expertise to make the best voting decisions, yet prefer not to always follow management’s recommendations because of management’s possible conflicts of interest;
WHEREAS proxy advisory firms have established reputations for giving sound independent advice to many institutional investors on how to vote their shares;
WHEREAS shareowners have a common interest in obtaining sound independent advice, but often insufficient private interest to justify paying for it individually (the "free-rider" problem);
THEREFORE BE IT RESOLVED that the Company hire a proxy advisory firm for one year, to be chosen by shareowner vote. Bristol-Myers Squibb shareowners request the Board of Directors to take all necessary steps to enact this resolution in time to hold the vote at the year-2001 shareowner meeting, with the following features:
To insulate advisor selection from influence by Company management, any proxy advisory firm can put itself on the ballot by paying an entry fee and declaring the price (no more than $10,000) for its advisory service for the coming year. The winning candidate is paid its declared price by the Company, and is expected to make voting advice freely available to all Company shareowners for the subsequent year. Fulfillment of that expectation is not policed by Company management, but rather by loss of reputation and future business if performance is disappointing.
The decision of whether to hire proxy advisory firms in later years is left open, and can be decided by future shareowner votes.
This proposal can be expected to improve the return on Bristol-Myers Squibb stock by:
- enhancing management accountability to shareowners by making professionally researched advice available to all;
- effectively enfranchising individual investors for the first time, ensuring that a majority of shares can be voted independently of management’s recommendations;
- encouraging greater competition among advisory firms to serve shareowner interests;
- reducing the cost to shareowners of voting advice, which is already being paid by pension funds on a subscription basis. (The same advice will be bought as a group purchase put to competitive bid, and will generate a corporate tax deduction. Many investors are also pension fund beneficiaries, so are already paying the cost anyway.)
Proxy advisory firms such as Proxy Monitor (http://www.proxymonitor.com), Institutional Shareholder Services (http://iss.cda.com), and Investor Responsibility Research Center (http://www.irrc.org) are frequently cited in the financial press. Examples are "Venator Holders Are Urged To Support Dissident Slate" (Wall Street Journal 07/06/1999) and "ISS's Influence Grows In Proxy, Option Matters" (Wall Street Journal 11/10/1997).
Articles discussing the company-pay system for proxy advice are on the Corporate Monitoring website (http://www.corpmon.com/publications.htm). These include "Collective Action for Dispersed Shareowners" (Corporate Governance International, September 1999) and "The Internet Will Drive Corporate Monitoring" (Gouvernance, Winter 2000). Further developments in corporate governance that may follow from this proposal are presented in "The Corporate Monitoring Firm" (Corporate Governance: An International Review, January 1999) and "Corporate Monitoring: New Shareholder Power Tool" (Financial Analysts Journal, September/October 1998).