Risk & Compliance

Corporate Chiefs Eye Director Issues

Kraft CEO talks about expanding board independence; 3M denies alleged inaction on poison-pill proposal.
Stephen TaubApril 28, 2004

In a sign of the recent surge of management sensitivity to corporate-governance issues, Louis Camilleri, chairman of Kraft Foods, told attendees of the company’s annual meeting that Kraft is seriously thinking about boosting the size and independence of its board, according to Reuters.

During a question-and-answer period, Camilleri said Kraft could announce the creation of a larger, more independent board “in the not-too-distant future,” reported the news service.

Kraft, about 84 percent of which is owned by Altria, the big tobacco company, has a nine-member board. Currently, five of the directors are employees either of Kraft or Altria. Kraft indicated that the new members would all be independent.

Elsewhere, management at 3M Co. showed sensitivity in another way — by contesting an opinion by one of the leading proxy-advisory firms.

W. James McNerney Jr., chairman and chief executive officer of the conglomerate, sent a letter to shareholders noting that Institutional Shareholder Services (ISS) has informed the company that they will recommend a “withhold vote” for this year’s nominees, including the CEO.

“They do not base this recommendation on any problem they have with 3M’s performance, my conduct as CEO, or on the performance of the other nominees,” wrote McNerney. “Instead, they base this recommendation solely on their claim that, in the words of their policy, ‘the board ignored a stockholder proposal [concerning “poison pills”] that was approved by a majority of the votes cast for two consecutive years.’ “

McNerney insisted the ISS claim is untrue and asserted that the ISS position is at odds with the Securities and Exchange Commission, which “explicitly concurred with our position.”

In 2002 and 2003, a stockholder submitted similar proposals relating to poison pills, also known as “rights plans,” even though 3M does not have and has never adopted a rights plan, he added.

The 3M board has reaffirmed a policy originally adopted in 2002 that calls for the company to submit any poison pill to a stockholder vote unless the board determines that such a submission would not be in the interests of stockholders under the particular circumstances, contended the CEO.

What’s more, 3M received an opinion from its Delaware counsel that this policy implemented the stockholder proposal to the furthest extent permitted under Delaware law, added McNerney.