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The Latest Corporate Social Responsibility News - Shareholder Activism 2.0: Binding Bylaw Amendments Seek to Hold TARP Banks Accountable for Economic Security

Submitted by: CSRwire Weekly News Alert

Categories: Sustainability, Corporate Social Responsibility

Posted: Nov 18, 2008 – 10:59 PM EST


Nov. 18 /CSRwire/ - While Citi is hemorrhaging over 50,000 jobs in response to the market collapse triggered by the subprime mortgage meltdown, the bank is foregoing the band-aid measure of sacrificing executive bonuses, which Goldman Sachs did this week (followed by others.) This voluntary sacrifice of executive compensation is a welcome symbolic gesture addressing the symptom, but it falls short of a comprehensive cure to the core problem. Starting in 1993, socially responsible investors have been filing shareholder resolutions urging banks to root out the cause - predatory subprime lending - as well as resolutions on obscene executive compensation and obscure derivatives as problems persisted.

Now, SRI firm Harrington Investments, Inc (HII) is raising the stakes by filing resolutions asking banks receiving billions of Federal assistance under the Troubled Asset Relief Program (TARP) to institutionalize board-level accountability for economic security. HII seeks to fill the accountability void when the US Treasury handed over US taxpayer money to the likes of Bank of America ($10 billion), Citi, and Goldman Sachs ($25 billion each) in exchange for preferred stock -- with no voting rights -- by creating Board Committees on US Economic Security. The HII resolution defines economic security in terms that may sound unfamiliar to banks, such as long-term health of the economy and economic well-being of US citizens.

HII innovated "Shareholder Activism 2.0" strategies by filing resolutions seeking binding bylaws amendments, instead of the “precatory” or advisory nature of most shareholder resolutions where companies can ignore even 99 percent votes. In other words, the resolutions seek to leverage shareholder power to codify risk management mechanisms into company DNA to counteract the lax board oversight that "brought the global economy to the brink of disaster." It will be interesting to see if a majority of shareholders want accountability from those who gambled away the security of their shareholder value -- and of overall economic stability.

This article was written by CSRwire contributor Bill Baue.

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