Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hlpinout who wrote (95829)	3/8/2002 6:58:20 AM
From: hlpinout	Read Replies (1) \| Respond to of 97611

GLOBAL INVESTING: HP-Compaq vote to test adviser's influence: ISS does not expect all its clients to follow backing for controversial Dollars 22bn deal, writes Paul Taylor Financial Times; Mar 8, 2002 By PAUL TAYLOR When the votes are cast for or against theHewlett-Packard bid for Compaq this month, the outcome will provide an important indicator of the real influence of Institutional Shareholder Services, the proxy advisory group that this week came out in favour of the controversial transaction. While many have already said they may not follow the recommendation, ISS support for the Dollars 22bn deal was seen as crucial for HP's efforts to keep its bid alive. HP has said that about 23 per cent of its shareholder base are clients of the Maryland-based firm. Jamie Heard, ISS chief executive, acknowledges that not all its clients will follow the advice: "Clients do not follow our recommendations by rote or blindly." In the case of HP and Compaq, he says: "Some will read our analysis and say 'it's a good piece of work but we don't agree with it.'" But he points out that if ISS's more than 1,000 institutional and corporate clients did not value its service they would not renew their annual subscriptions that range from "a few thousand dollars to well into six figures". As is, renewals are more than 95 per cent. Mr Heard, a 20-year veteran of the corporate governance movement, rejoined ISS last year when The Proxy Monitor acquired the business from its former owner, Thomson Financial. He attributes its success to growing awareness of corporate governance and the impartiality of the advice. Some critics, including Walter Hewlett who opposes the HP-Compaq deal, have accused ISS of bias towards managements. Mr Heard says an analysis of its recommendations shows that, in contested bids, it splits evenly on whether to approve the deals. On big deals such as the proposed Compaq-HP merger, ISS assembles a team of analysts drawn from its 450-person staff to assess different aspects of the deal, question the management teams and meet the interested parties. "Our purpose from the beginning has been to encourage better corporate governance but we are only successful in so much as our clients value our services," Mr Heard says. That philosophy dates back to the firm's origins. ISS was set up in 1985 by Bob Monk, an Erisa (Employee Retirement Income Security Act) administrator in the Labor Department who was a leading campaigner on corporate governance issues and believed pension fund fiduciaries should pay more attention to proxies. "Before that, most fund administrators threw proxies in the garbage can," notes Patrick McGurn, an ISS veteran now in charge of its corporate programmes. At the time there were also reports of conflicts of interest involving pension fund managers under pressure from corporate management. Since inception, ISS has grown rapidly and now has offices in the US, Canada, the UK and, most recently, Japan. The firm's research team, which mostly comprises lawyers and MBAs, analyses proxies and issues vote recommendations for more than 10,000 US and 10,000 non-US shareholder meetings each year. Research and voting instructions are delivered to the institutional client base via two web-based applications: ProxyMaster.com and ISS-direct.com. Institutional clients pay a graduated subscription based on the number of stocks in their portfolios and the services they require. In addition to its core proxy analysis service, ISS offers a customised voting agent service for those institutions that want to outsource their proxy voting. Other ISS units provide a social screening service for investment managers who need to implement a social investment strategy and a monitoring service that tracks and alerts clients to securities class actions that might interest them. Mr Heard says ISS shortly plans to launch a corporate governance rating service that will assign marks out of 100 to US companies on the basis of their governance policies. "Enron answers the question about whether governance matters," he says. Copyright: The Financial Times Limited 1995-2002