A large activist labor-backed institutional investor just isn't satisfied with Washington Mutual Inc.'s Kerry Killinger's decision to step down as board chairman at the country's largest savings and loan. CtW Investment Group, an organization that advises pensions for unions belonging to the Change to Win labor group, wants more.
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Sure, CtW is excited that Killinger announced Monday that he will resign from his chairmanship position -- though he remains at WaMu as CEO. And it's also happy that WaMu director Mary Pugh, president of investment firm Pugh Capital Management, resigned from the WaMu board in April. But, it is still peeved that two directors on the WaMu board, James Stever and Charles M. Lillis, remain on the board. Both WaMu directors had been the target of a "just vote no" campaign orchestrated by the labor union fund.
At the WaMu annual meeting April 15, company tallies showed that 41% of shareholders opposed Stever's renomination, and 41% opposed Charles M. Lillis, a director who was targeted by another union-backed pension fund. But CtW, estimated that by counting only votes of actual shareholders, the tally for removing 50.9% for Stever and 51.2% for Lillis.
"The vote to name an independent chairman excluded uninstructed broker votes, but the disputed re-election of directors James H. Stever and Charles Lillis may have resulted from the inclusion of these phantom votes," said CtW Investment Group research director Richard Clayton in a statement. "The board needs to disclose whether Stever and Lillis received a majority of votes cast by shareholders and to request the resignation of any director who did not."
CtW asserts that Lillis and Stever were put over the top because of so-called broker nonvotes, also known as broker discretionary votes. For clients who never indicate how to vote their shares, stockbrokers are permitted to cast ballots for them in "routine matters," such as uncontested director elections, as the brokers see fit. Critics deride this practice as corporate ballot stuffing, because brokers typically back management initiatives. For CtW, the broker-nonvote issue is particularly relevant because WaMu has a majority vote policy in its corporate governance guidelines. - Ron Orol
See CtW Investment Group press release
See Dealscape: CtW declares WaMu victory, turns up the heat
Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.
