Royal Dutch Shell Group .com

Financial Times: US investors step up pressure


By Sundeep Tucker site; Apr 11, 2004


Governance problems at Safeway, the US retailer, and Royal Dutch/Shell, the oil company, will be among the "big issues" for US investors this year.


That is the view of Jamie Heard, vice-chairman of Institutional Shareholder Services, the US proxy voting advisory firm. Speaking to FTfm on a brief stopover in London last week, he said activist shareholders would focus on companies with "peculiar" governance structures during this year's annual meeting season.


His remarks will put pressure on Safeway and Royal Dutch, the Netherlands-based arm of Royal Dutch/Shell. ISS recommendations are used by up to 750 big pension funds and other institutional investors.


They can swing as much as 20 per cent of the vote at a company annual meeting, according to some shareholders. Mr Heard also said that chief executive pay would continue to be an issue for investors and that there would be a greater focus on forcing US companies to split the roles of chairman and chief executive. "I predict that in five years from now, independent chairmen will be the norm in the US."


He said the issue of the combined role had gathered "serious momentum" after Michael Eisner, Disney chief executive, was forced by angry investors to give up the chairman position.


Mr Heard added: "Dell and Oracle have also given ground on this issue and it is a move which we encourage."


Mr Heard, who recently stepped down as chief executive of ISS, said US investors were lobbying the Securities and Exchange Commission to change the rules so that shareholders could nominate directors to the board.


The SEC will announce its decision soon and Mr Heard believes that it will listen to investor concerns and "introduce a degree of accountability" into the process. ISS has also backed proposals by accounting regulators to force companies to deduct the cost of share options from profits. He said: "They are not cost-free and should be accounted for. This move will curb their misuse."


Mr Heard praised UK institutional investors for being quicker than their US counterparts to appreciate the benefits of corporate governance.

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