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June 09, 2000
Shareholders Support Board Independence at Cablevision Systems
Two TIAA-CREF resolutions on board independence, one at Cablevision and another at Telephone and
Data, receive more than 40 percent support from shareholders.
SocialFunds.com --
One of the central themes of corporate governance is board independence, the freedom of the board
of directors from conflicts of interest with company management to most effectively meet their
responsibilities to shareholders. Although most publicly-held U.S. companies have a relatively
independent board, two recent shareholder resolutions sponsored by TIAA-CREF illustrate that some
companies still have a way to go on this issue.
 TIAA-CREF, a national financial services organization
managing nearly $300 billion and one of the world's largest institutional investors, announced the
results of two shareholder resolutions on board independence this week. The resolutions, at
Cablevision Systems and at Telephone and Data Systems, each gained the support of more than 40
percent support from independent shareholders.
"These votes show that there is growing
shareholder support for board independence, even in the face of management opposition, as essential
to sound corporate governance," said Peter C. Clapman, TIAA-CREF Senior Vice President and Chief
Counsel, Investments.
Cablevision and Telephone and Date are among the minority of large
U.S. public companies with "dual class" common stock and differential voting rights, the
shareholder equivalent of an oligarchy. Each company is virtually controlled by an elite group that
has the right to elect a majority of the board and that has 10 votes per share, while public
shareholders have only one vote per share.
This stock structure violates the principle of
one-share, one-vote, a fundamental of shareholder democracy, and abets the perpetuation of a
board's domination by management insiders. "There are strong reasons why, even in dual class stock
companies, a substantial majority of independent directors is in the best interests of all
shareholders," said Clapman.
At this week's annual meeting of Cablevision shareholders,
the board independence resolution was supported by an estimated 43 percent of shares voted. This
count excludes those shares that TIAA-CREF regards as not independent of management, class B shares
controlled by insiders with super-voting rights, and class A shares controlled by insiders or held
by AT&T, which is contractually allowed to name two directors to the Cablevision board.
Cablevision Systems initially sought to exclude the board independence resolution at the
Securities and Exchange Commission (SEC). But the company withdrew its effort after TIAA-CREF
expressed vigorous support for the right of shareholders to express their views on this key
corporate governance issue, one of the advantages to being a shareholder with almost $300 billion
in assets.
In a similar vote at Telephone and Data Systems' annual meeting on May 19,
holders of its common shares cast 45 percent of their shares in favor of the TIAA-CREF resolution.
This count excludes Series A common shares which are controlled by a family voting trust, the
oligarchy of this particular company.
Earlier this year, the same TIAA-CREF resolution on
board independence received the support of 30 percent of shares voted at Paccar, the international
truck manufacturer, according to a preliminary company account. The resolution is also expected to
come to a vote later this year at ICN Pharmaceuticals. TIAA-CREF withdrew six other resolutions on
board independence after targeted companies made progress on board independence policy.
Several other shareholder resolutions this year took different approaches to board
independence, depending on the company circumstances and shareholder goals. At least six
shareholder resolutions urged companies to adopt an independent nominating committee, while others
asked for a policy on board independence, additional board nominees to enhance shareholder choice,
and "cumulative voting" allowing shareholders to vote for individual nominees.
In the
ongoing effort to make corporate boards more independent and responsive to shareholder needs and
concerns, TIAA-CREF is a major player with a comprehensive policy on corporate governance.
"We believe an independent board makes companies more credible to investors and other capital
market participants," said Clapman. An independent board "provides the best long-term protection
against the problems that even the best-managed companies inevitably face, and is more likely to be
in a position to fully discharge the fiduciary duties that a board owes to all shareholders."
©
SRI World Group, Inc. All Rights Reserved.
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