September 10, 2003
Influential Institutional Investors to Form National Coalition for Corporate Reform
by William Baue
The National Coalition for Corporate Reform, championed by state treasurers and pension funds,
seeks to restore investor confidence through better corporate governance.
Today, former Enron Treasurer Ben Glisan pleaded guilty to conspiracy and was sentenced to five
years in prison, representing at least partial rectification for the corporate governance scandals
that have rocked the financial markets the past few years. However, it will take much more than
this prosecution to restore investor confidence in corporate America.
systematically address investors' crisis of confidence, New York State Comptroller Alan Hevesi proposed a
comprehensive solution in his keynote speech at the annual meeting of the Council of Institutional Investors (CII) in San Diego last week.
Mr. Hevesi called for the formation of a National Coalition for Corporate
Reform (NCCR) to advocate for improved corporate governance through proxy voting, litigation,
regulation, and lobbying.
"The goal of the coalition is to reform corporate governance
and restore confidence in the financial markets," said Mr. Hevesi. "NCCR will unite institutional
and individual investors, labor leaders, corporate CEOs, elected officials and community leaders in
support of a program of corporate governance reforms, regulation and legislation."
number of influential institutional investors endorse the establishment of the NCCR, including
California Treasurer Philip Angelides, Pennsylvania Treasurer Barbara Hafer, and AFL-CIO President
John Sweeney. Also expressing support are Sean Harrigan, president of the board of the California
Public Employees Retirement System (CalPERS), New York State Attorney General Eliot Spitzer, and
New York City Comptroller William C. Thompson, Jr.
The corporate governance scandals
manifested themselves not only psychologically, sapping investors of their ability to rely on
information emanating from corporate America, but also, of course, financially. The Brookings
Institution, an independent research and public policy think tank, estimated that the scandals cost
the US economy some $35 billion in the first year.
Mr. Hevesi's office applied the same
methodology as the Brookings study to the New York State economy, and found that the state lost
some $2.9 billion in economic activity and $1 billion in taxes in its fiscal year (FY) 2003 due to
"The best way to stop corruption is by instituting policies and structures
inside corporations that prevent it or expose it early, by ensuring strong and effective regulation
and oversight, and by suing when necessary to recover investors' losses and provide a deterrent,"
said Mr. Hevesi.
The NCCR intends to promote better corporate governance by pushing for
independent directors, and will weigh in on the Securities and Exchange Commission's proposed rules
for the proxy process regarding the nomination and election of directors. The coalition will also
promote better corporate governance through proxy voting on pertinent shareholder resolutions, such
as those regarding performance-based stock options and reeling in American companies that have
"Investors have a unique and essential role to play in achieving
this [goal; as] the owners of public corporations, investors have the right and the duty to ensure
that their companies are operated properly," said Mr. Hevesi. "They have a strong interest in
protecting their [investments, and] they have the power to make essential internal changes in the
way corporations function."
The NCCR will also lobby for better regulation of corporate
conduct, focusing on changes to the Private Securities Litigation Reform Act of 1995, the
Sarbanes-Oxley Act of 2002, and the Class Action Fairness Act of 2003.
considers litigation a "last resort" for redressing corporate mismanagement and fraud that costs
shareowners. According to the NCCR, lawsuits can result not only in financial restitution if they
are successful, but also they can act as deterrents to malfeasance.