New York City's public employee pension funds are using their financial muscle to try to force the companies they invest in, including Netflix and Wellpoint, to elect independent board chairmen.
The pension funds have urged shareholders to replace CEOs as heads of the company boards, among other corporate governance issues.
"The whole purpose of the board is to exercise independent oversight over management so that role is potentially compromised." Assistant City Comptroller Michael Garland said. "Having top corporate positions held by one individual is an inherent conflict of interest. We're the only main industrialized nation where combined chair and CEO is the norm."
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At Netflix, the CEO remains chairman despite more than 70 percent of shareholders backing a proposal to replace Reed Hastings, its CEO, as board chairman.
After the vote, a Netflix spokesman told Deadline Hollywood that the board believed its corporate posture was "appropriate."
At Wellpoint, the pension fund found success. A similar proposal was taken off the table when the Indianapolis-based health care company acceded to the demand for an independent board leader for one to two years.
The five pensions funds covering New York City's employees have combined assets of $137. 4 billion. The funds have pressed for action at 57 companies on a range of issues from recovering bonuses from executives who commit misconduct to insisting on proper reporting of workers' rights compliance from foreign suppliers.
Other companies that have been targeted over the CEO-as-chairman issue include JPMorgan Chase, Aetna and Johnson Controls. Although each company has opposed the move, anywhere from 30 percent to 42 percent of shareholders have approved of it.
In May, the JPMorgan board reaffirmed CEO Jamie Dimon's place as chairman. The percentage of JPMorgan shareholders backing an independent board chief fell to 32 percent from 40 percent in 2012.
At the same shareholders meeting, three directors who sit on JPMorgan's risk committee were also re-elected, but by much narrower margins than in the past.
"This was a clear expression of no confidence in the board risk oversight," Garland said.
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