Massey Energy
Background
On 5 April 2010 disaster struck at Massey Energy’s Upper Big Branch coal mine in West Virgina, USA. Twenty nine miners were killed in an underground explosion, in the worst mine accident in the United States since 1970. As a result, US trade unions and large pension funds have intensified their criticism of Massey Energy’s corporate governance risk management and practices.
Investor Risks
According to campaigners, three Massey directors are ultimately responsible for risk oversight and corporate governance failures that likely led to the tragic accident earlier this month and destroyed $1.5 billion in shareholder value (as of 4/30/2010).
In a detailed briefing to shareholders, the Change to Win Investment Group argues that Massey’s serious compliance failures have led to costly litigation and recurrent fines, including record fines in 2008 for worker safety and environmental violations.
Furthermore they assert Massey’s alarming record of non-compliance ultimately reflects the board’s inability to exercise independent oversight of Chairman and CEO Donald Blankenship. Signs of an entrenched board include its classified structure, excessive CEO compensation and ignoring investor concerns.
Shareholder Action
The AFL-CIO and Change to Win (CtW) Investment group called on Massey Energy’s shareholders to vote “Withhold” on director nominees Richard M. Gabrys, Dan R. Moore and Baxter F. Phillips, Jr at the 18 May 2010 annual meeting.
The directors won re-election by narrow margins. This outcome casts a cloud over the legitimacy of the current Massey board and is a clear demand for new directors who will make needed changes in company leadership. The opposition votes against the Massey directors were the highest of any this year at an S&P 500 company. Despite demands from shareholders at the meeting, the company refused to disclose the actual vote count and that nearly half of the voting shares appear to have opposed these directors’ election.
Briefings and Reports
Resources
Updates
Following shareholder pressure, the board of directors at Massey Energy Co. announced several proposals as part of the sweeping overhaul of its system of corporate governance this summer. Among the alterations are several notable changes:
- Investors comprising of at least 25% of the company’s shares outstanding will now have the capability to call special shareholder meetings,
- Corporate governance guidelines will be altered to clarify the powers of the board’s lead independent director,
- All board members will now be required to annually stand for re-election (whereas prior to the accident only a third of the directors had to face annual re-elections),
- The separation of its safety, environmental and public policy committee into two detached panels
These changes will be voted upon at a special shareholder meeting on 6 October 2010. 80% of shares outstanding are needed to pass these proposals.