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Institutional Investors Say Reforms Go Too Far
NEW YORK -- Despite a steady drumbeat of news from the high-profile trials involving such notables as Martha Stewart, Tyco and Enron, nearly half of institutional investors who responded to a recent survey by Broadgate Consultants Inc. are not persuaded that the Sarbanes-Oxley Act has been effective in promoting better corporate governance and protecting investors.Similarly, according to a survey of 120 buy side portfolio managers and research professionals, 52% said that the push for corporate governance may have gone too far and now risks undermining the credibility of its supporters. In addition, nearly 40% of respondents thought that public pension funds are attempting to wield too much power, evidence that certain high-profile actions -- such as one prominent state pension fund's recent decision to oppose the election of corporate directors at 2,700 companies -- may be doing more harm than good.Nevertheless, investors strongly favor efforts to get more directly involved in the election of boards. Evidence of this demand for more power is seen by the nearly 80% of respondents who believe the Securities and Exchange Commission's proposals to give shareholders more power to nominate corporate board directors is a good step toward better governance. There is also a desire for reform in-house as well, with about three-quarters of respondents believing that the board structures of mutual funds are in need of reform.Reflecting their bias towards U.S. companies, nearly 60% of respondents believed that boards of their European counterparts are less effective. However, a sizeable number of investors believed U.S. companies should adopt European-style corporate governance practices that balance the needs of constituencies beyond shareholders.In what could prove to be an ominous trend for traditional underwritings, more than 60% of respondents supported Google's planned stock auction as opposed to traditional initial public offering methods; however, most felt that there should be a discount accorded to Google to reflect the fact that insiders will retain control of the company. Only one-third of the respondents said there should not be a discount. The company's dual voting structure also met with skepticism. Less than 25% of respondents felt that dual voting structures, such as the one proposed by Google, are justified.Broadgate Consultants Inc. provides strategic corporate and capital markets communications advisory and implementation services to public companies and private equity firms and their portfolio companies.Visit Broadgate Consultants Inc.: www.broadgate.com"