Many, many will address the Obama Administration and the newly emboldened Democratic majority in Congress as they try to repair America’s frayed financial and regulatory systems. Investor activists intend to be one of the many.

“For activists, our time has really come, and we will be speaking up at the next Congress,” promises Richard Ferlauto, director of corporate governance at American Federation of State County and Municipal Employees, a union that has long been a thorn in Corporate America’s side. “After the election, we will be communicating with the new powers that be very quickly in the House and Senate.”

Indeed, anticipating the arrival of a new Washington crowd, the Council of Institutional Investors recently announced plans to hold a summit meeting in January to recommend changes to the next Congress and president. CII Executive Director Ann Yerger says the meeting is still in the formative stages and no date yet has been set, but adds: “We all anticipate significant regulatory reforms.”

Many other activist powerhouses plan to participate in the meeting, including the California Public Employees Retirement System, the nation’s largest pension fund. A CalPERS spokesman, however, declined to give any hints of what might happen there. “It is still in the conference mode,” he said in an interview. “We’re working with investors.”

Likewise, spokesmen for the New York City Comptroller’s office and for the CFA Institute have no comment on the meeting at this point, although both presumably will participate in whatever meeting the CII ultimately hosts.

In general, Yerger says, the Council will keep advocating for more accountability from corporate boards and for more restrictions on executive pay.

Translated into specifics, those goals are likely to include a mandatory provision that directors are elected by a majority of shareholder votes; proxy access for director nominations (an idea Yerger dubs “investor choice”); and adopting the New York Stock Exchange’s proposal to bar broker-dealers from voting in director elections unless their clients provide instructions to do so. The NYSE first proposed the broker restrictions about 18 months ago, but the Securities and Exchange Commission has kept it in the deep freeze since then.

“The SEC should play a particular role and not be under another organization ... Being the voice for the small investor is fundamental to everything.”

— Richard Ferlauto,

Director of Corporate Governance,


Yerger also promises that executive pay will be a major focus among shareholder activists when they sit down with—or at least communicate to—the new president and Congress. She figures now is a good time to push for an annual shareholder advisory vote on executive compensation; the House passed such a bill last year, and Barack Obama himself co-sponsored similar legislation in the Senate. Many companies are adopting say-on-pay votes already, assuming legislation is inevitable.


“From our point of view, say-on-pay will happen under the next administration,” Ferlauto said in an interview shortly before the election.

Yerger also is looking for stronger rules and more latitude for clawbacks, which would let shareholders recoup previously distributed bonuses to top executives if a company’s financial performance later turns out to be bogus. Yerger also wants to see some action taken on restricting or minimizing golden parachute retirement plans. “We’re still wrestling with the details,” she says. She and the other activists will also be seeking further regulatory reform built on actions taken in September by the Bush administration.

The Fate of the SEC

Yerger stresses the key to any action must be protecting investors. “The markets were built on investor confidence,” she adds. “Don’t lose site of the investors.”

For that reason, Ferlauto—who says AFSCME plans to communicate a four- or five-point agenda to the new Congress—stresses that the Securities and Exchange Commission must be preserved as an independent regulator. What’s more, he wants its resources increased. The SEC saw a big budget increase earlier in the decade after Enron and WorldCom, but now its resources are far more constrained.


Below is a statement from the AFL-CIO about the Obama campaign, Barack Obama's victory, and what the union hopes to achieve next.

“More than 250,000 union volunteers took to the streets in the largest independent voter mobilization in history,” AFL-CIO Political Committee Chair and AFSCME President Gerald McEntee said. “People volunteered because they want a President who will fight for America’s working families. In the critical battleground states, workers gave Sen. Obama the winning edge.”

The record mobilization for this election won’t end on election day, AFL-CIO leaders said.

“The election is just step one in delivering the change we need,” Sweeney said. “Working men and women are poised to keep the energy pumping to help the Obama administration lead the change we need. There will be no gap or letdown.”

Working families’ immediate and long-term priorities include:

A broad-based economic recovery package in the short term that provides aid to cash-strapped local and state governments to maintain vital services, extends unemployment benefits and increases funding for food stamps to provide relief to working families who are hurting during the economic downturn and invests in infrastructure spending to rebuild our crumbling roads, bridges and schools and put people to work;

Restoring workers’ freedom to join unions and bargain with their employers for better wages and benefits by passing the Employee Free Choice Act;

Reforming our broken health care system to cut costs for families, increase access to quality care and provide coverage to the nearly 50 million Americans without health insurance;

Investing in America’s future and create a new economy of good, green jobs through long-term infrastructure projects; education and skills; and clean, renewable, home-grown energy;

Re-regulating Wall Street to restore the integrity of the banking and financial sectors and protect working people’s hard earned money - - their pensions, savings and homes;

Developing a new model for fair trade that will restore American competitiveness and protect good jobs at home and worker’s rights around the world;

Enacting broad-based tax reform to end tax giveaways for the wealthy and corporations that outsource American jobs.



The fate of the SEC is likely to be a critical issue, given that some in Congress as well as other experts have been calling for all financial regulators to be consolidated into one all-encompassing oversight body. Even Christopher Cox, the soon-to-depart chairman of the SEC, wants his agency merged with the Commodities Futures Trading Commission.

Ferlauto, however, argues for an independent SEC. “The SEC should play a particular role and not be under another organization,” he insists. “Being the voice for the small investor is fundamental to everything.”

His other priorities are similar to those of Yerger: majority voting, proxy access, and comprehensive executive compensation reform that expands on the restrictions included in the government’s $700 billion bailout bill. Say-on-pay votes, clawback provisions, and curbs on golden parachutes are all in the mix.


Daniel Pedrotty, director of the AFL-CIO Office of Investment, plans to push for better disclosure and transparency in the capital markets in general. He is especially targeting what he calls the “opaque pools of capital”—holdings of hedge funds and private equity funds, in particular the handful of firms that recently went public. “If they are public and they want access to the public markets, they should be regulated by the Investment Company Act,” Pedrotty contends.

That would mean far more disclosure than such funds currently provide, or that they would ever want to give. Yes, Pedrotty says, hedge funds with more than $100 million in assets must disclose all equity-related positions on a quarterly basis. But he insists that is not enough.

Pedrotty also wants hedge funds to disclose their short positions; he says that could have helped sound the alarm earlier on investment bank Bear Stearns, which collapsed earlier this year. Many in the banking sector suspect hedge funds held huge short positions in Bear, dragging it down. “Big pools of capital are moving about, and we do not know where they stand,” Pedrotty says. “Why are we leaving huge institutions with billions of dollars without regulation?”

If investor activists get their way, the answer could be quite different this time next year.