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SWIB Joins Council of Institutional Investors Seeking by pjg18873


									 SWIB Joins Council of Institutional Investors Seeking Reforms to Prevent Future Enrons

The Council of Institutional Investors (CII) is an organization of some 250 public, corporate and
union pension funds, money managers and investment and securities professionals representing
nearly $2 trillion in pension assets. CII seeks to address investment issues that affect the size or
security of plan assets. Its objectives are to encourage member funds, as major shareholders, to take
an active role in protecting plan assets and to help members increase return on their investments as
part of their fiduciary obligations.

Founded in 1985 in response to controversial takeover activities that threatened the financial interests
of pension fund beneficiaries, the group began with 20 member funds, including the State of
Wisconsin Investment Board (SWIB). Today, it is recognized as a significant voice for institutional
shareholder interests.

As a founding member of CII, the Investment Board has been actively involved in many of CII's
work in key corporate governance issues that impact the rights of shareholders.

On Monday, February 04, 2002, CII held a press briefing in Washington DC where representatives
from some of the country's largest institutional investors, including SWIB, addressed concerns
surrounding Enron and presented reforms they believe would help prevent future Enrons.

Council of Institutional Investors
1730 Rhode Island Avenue, N.W.
Suite 512
Washington, D.C. 20036
Tel: 202-822-0800 Fax: 202-822-0801

*Reform auditor independence standards by prohibiting auditors from providing any non-audit
services to their audit clients—a position the SEC backed off from in 2000 under pressure from the
accounting industry and some in Congress. The SEC might also consider requiring companies to
rotate their outside auditors every few years, imposing “cooling-off” periods before audit firm
employees could work for audit clients, and prohibiting
outside accountants from providing any internal audit services to audit clients.

*Radically reform the oversight of auditors. It is clear that the accounting profession’s current
system of self-oversight is not working. The Council urges that the opinions of all interested
parties—not just the Big Five accounting firms—be considered before any new oversight model is

*Require enhanced disclosure of director links to companies. Director independence is an issue of
fundamental importance to Council members and other investors, and current disclosure rules are
inadequate. The SEC has failed to respond to calls for heightened disclosure from the Council and
others for the past four years.
*Toughen the stock exchanges’ listing standards on board independence and board composition.
While some changes affecting board audit committees were adopted several years ago, they fell far
short of standards endorsed by a “blue ribbon” commission, the Council, its members and even the
Business Roundtable. The Council believes the exchanges should adopt a definition of independent
director that matches its own or comparable definitions used by TIAA-CREF, the California Public
Employees’ Retirement System or other major investors. It also believes a substantial majority of the
board (at least two-thirds) and all audit committee members should be independent.

*Do not soften the SEC’s stance on enforcement. The Council believes tough enforcement efforts—
and criminal prosecutions whenever possible—are the most effective deterrents to criminal activity,
and it is distressed by Securities and Exchange Commission Chairman Harvey Pitt’s
recommendation that the agency take a “kinder, gentler” approach with the accounting profession
and other possible wrongdoers.

*Restore integrity to the proxy voting system by eliminating the stock exchanges’ “broker may
vote” rule, which allows brokers to vote on so-called “routine” proposals, including the election of
directors and the ratification of auditors. As Enron has shown, these proposals are not ‘routine.’ In
fact, they may be two of the most important votes cast by shareholders. Permitting broker votes
amounts to “ballot stuffing for management.”

*Meaningfully update disclosure requirements for financial and other critical information.
“Meaningfully” is the key to this recommendation; simply switching to more current disclosure, as
SEC Chairman Pitt has proposed, is not enough, the Council believes. It urges the SEC to consider
investors’ views on what types of disclosure are material to them as it moves forward with reforming
disclosure requirements.

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