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May 13, 2010
Pension Funds Join New York State Comptroller’s Call to Withhold Votes in Favor of Board Directors at Massey
    by Robert Kropp

Following the Upper Big Branch mining tragedy, the funds assert that the directors have failed to oversee risk and protect investments.

In the wake of last month’s tragedy at Massey Energy’s Upper Big Branch coal mine in West Virginia, the New York State Common Retirement Fund called on shareowners to withhold votes from three candidates for the company’s Board of Directors. The three—Baxter F. Phillips, Richard M. Gabrys, and Dan R. Moore—also serve on the Board’s Safety, Environmental, and Public Policy Committee (SEPPC).

The disaster at Upper Big Branch, which claimed the lives of 29 miners, occurred in the aftermath of repeated environmental and safety violations by Massey, which led to at least two criminal convictions in the past three years. In addition, Massey has already reported that financial losses from Upper Big Branch could lead to losses of as much as $150 million.

The sole trustee of the Fund, which manages $129 billion in assets, is New York State Comptroller Thomas P. DiNapoli, who said of the three, “Directors Phillips, Gabrys and Moore have neglected their responsibilities to oversee risk and have failed to protect our investments. There’s no excuse for the lack of accountability at Massey. The solution is clear: they have to go.”

DiNapoli’s call for the withholding of shareowner votes from the three directors was seconded by proxy advisors
RiskMetrics Group and Glass Lewis. In its recommendation, RiskMetrics stated, “Beyond the recent tragedy, the company's track record of violations and fines is disturbing… A board that is no longer responsive to shareholders and does not provide sufficient oversight to management is less able to protect or enhance shareholder value.”

The New York State Common Retirement Fund’s position has since been joined by a number of influential pension funds, including the
California State Teachers’ Retirement System (CalSTRS), the Illinois State Board of Investment (ISBI), the Maryland State Retirement and Pension System, the New York State Common Retirement Fund, and the New York City Employees’ Retirement System (NYCERS).

In addition, the state treasurers of Connecticut, North Carolina, Oregon, and Pennsylvania have announced their support for the measure.

In a
letter submitted to the Securities and Exchange Commission (SEC) on May 11, the pension funds stated, “Given Massey’s repeated and serious safety violations as discussed above, we believe SEPPC Directors Phillips, Gabrys, and Moore have failed to carry out their roles and responsibilities.”

Massey Energy’s largest institutional shareowners—Fidelity and BlackRock Financial Management—have not as yet joined the call to withhold votes from the three directors. Massey’s annual general meeting will be held on May 18.


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