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Founding
of the ICGN |
“Would
the meeting please come to order.”
It was 8:45 am on March 29 1995, and Bill
Crist was looking around the Riverview conference
room at the Watergate Hotel,
a modern complex curled along Washington, DC’s Potomac
River. Some 49 people—nearly all strangers to each
other—had assembled around a table and on chairs
against the walls.
The six-hour meeting would prove a tipping point. |
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| It would not only inaugurate
a new organization, but begin an era of increasingly routine
communication among institutional investors with trillions
of dollars on issues of corporate governance. For now,
though, this was an exploratory session. Crist,
President of California’s big CalPERS civil service
retirement system, was serving as moderator, and his first
order of business was to see if the delegates before him,
most from big global funds, could find enough common ground
to select a name for a proposed new enterprise. |
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The Watergate meeting was
the culmination of parallel trends—and work by individual
proponents—in the ten countries represented in the
room. By 1995, US public pension funds had experienced
a decade of shareowner activism. They had established
their own collective body in the Council of Institutional
Investors (CII). More than a year earlier, in 1993, executive
director Sarah Teslik had asked staffer
Matthew Aiello to approach all those
who were involved in corporate governance outside the
US. His mission was to test whether an appetite existed
for global collaboration. Teslik had
responded to Crist (left), who
had been pressing to find global means to amplify the
voice of CalPERS and other funds. |
| Innovation
and exchange of ideas across borders |
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The new focus on investor activism
was inspired by a pioneering project on institutional
investment at Columbia University led by Weil, Gotshal
& Manges LLP senior partner Ira Millstein
(right). Likewise Millstein's
path-breaking work in the corporate sector with GM and
other major US corporations, as well as the Business
Roundtable, laid the foundations for the first national
code developed by Sir Adrian Cadbury.
Millstein, one of the most prominent
corporate governance advocates, would soon chair the
Business Sector Advisory Group, producing crucial groundwork
for the Organisation for Economic Co-operation and Development
(OECD) global principles of corporate governance. |
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Corporate governance was
indeed a live issue elsewhere. In the UK, the Robert Maxwell
scandal had given rise to Sir Adrian Cadbury’s
(left) broad-based committee, and a pace-setting
corporate governance code. Richard Regan
at the Association of British Insurers (ABI) and Geoff
Lindey at the National Association of Pension
Funds (NAPF) had been fully involved in such work. Through
the 1990s, Cadbury and successor codes would result in
sweeping change in the way British corporations were run.
Now Regan and Lindey
were at the Watergate. Cadbury and Millstein,
with Professor Hasung Jang were to be
recognised for their worldwide leadership when they received
the inaugural
ICGN corporate governance award in 2001. |
| Months before Cadbury, Ann
Fitzgerald’s Irish Association of Investment
Managers had crafted its own similar code. Swiss investor
André Baladi had begun promoting
international collaboration on corporate governance. The
Pension Investment Association of Canada (PIAC) had produced
corporate governance standards in 1993 under its director,
Keith Douglas (right). French
employers were on the eve of issuing their own set of
governance principles developed by Marc Viénot’s
committee while AFG, the trade association of French asset
managers, was assembling a corporate governance committee
which would later publish the 'Hellebuyck code.' |
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Ian Matheson,
executive director of the Australian Investment Managers’
Association was writing the group’s Blue Book governance
guidelines with Corporate Governance International’s
Sandy Easterbrook (left). He
was fresh from battles with News Corp., which had attempted
to create unequal share voting rights. |
| In South Africa, Mervyn King’s
(right) panel would shortly produce its own historic
contribution, melding governance with corporate social
responsibility. In Japan, the Corporate Governance Forum,
founded in 1993, was beginning work on its first code
of best practices, issued in 1997. Brazil’s Bengt
Hallqvist was about to launch the Instituto Brasileiro
de Governança Corporativa, the first body in Latin
America dedicated to corporate governance. Hasung
Jang was building PSPD’s Participatory
Economic Committee as a force for shareowner advocacy
in Korea. Meanwhile, Italy’s Assogestioni, the fund
management association, and Sweden’s Aktiespararna,
the investor group, were looking for international help
as they expanded shareowner voices in their markets. And
Mats Isaksson, Rolf Skog and
others had founded Sweden’s Corporate Governance
Forum in December 1994. |
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Many of these organizations
were now represented in the Riverview Room. But until
then few had been in regular touch with each other,
or known much of each others’ progress.
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| The beginnings of
shareholder activism |
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Only two services routinely monitored
cross-border corporate governance for funds with international
portfolios. In 1988, Stephen Davis had
written a seminal book comparing corporate governance
and shareowner activism in major markets, and had founded
a consortium of institutional investors to sponsor first-ever
global coverage at the Investor Responsibility Research
Center (IRRC). Howard Sherman had followed
three years later by establishing a similar unit at Institutional
Shareholder Services (ISS), headed by governance architect
Robert A.G. Monks (left), widely
regarded as a pioneer of shareholder activism and Nell
Minow. |
| Services covering
shareowner activism such as Easterbook’s
had arisen, too, in several countries, and they were assembled
that spring morning in Washington. PIRC, co-managed by
Alan MacDougall and Anne Simpson
(right), later ICGN’s first executive director,
had spearheaded governance and social responsibility screening
of UK companies. Pierre-Henri Leroy had
founded Proxinvest, based in Paris, a few years earlier.
Sophie L’Hélias, also in
Paris, was representing institutional investors on corporate
governance. So was Dario Trevisan, from
a law firm in Milan. |
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| Innovators at all these
institutions had come to recognize that international
cooperation could accelerate progress they could make
at the national level. But drawing together the ICGN’s
founding 49 for a March breakfast in Washington would
take not only the opportune convergence of institutional
interests, but dogged behind-the-scenes work from key
dedicated individuals. |
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André Baladi (left),
for one, had long crusaded for the creation of a global
body to advance corporate governance reform. He had founded
the International Shareholder Defence Association in Geneva
in 1989. Baladi developed the concept
further through visits to CalPERS, IRRC, ISS, the New
York City pension funds and TIAA-CREF in the US, as well
as to both ABI and NAPF in the UK. He delivered speeches
on the subject on both sides of the Atlantic, including
at the CII’s spring 1990 meeting and at The Economist’s
December 5-6 1991 International Corporate Governance Conference
in London. |
| In 1993, when
Council of Institutional Investors’ staffer Aiello
started to explore prospects for global cooperation, he
contacted Stephen Davis (right)
at IRRC. Along with Baladi and ISS’s
Sherman, Davis was one
of the few who already knew most of the emerging international
players in corporate governance. The two met for lunch
at Washington’s Tabard Restaurant on October 14,
where Davis proposed a plan for a global
equivalent of the CII and provided names of prospective
investor co-founders. Aiello returned
to Teslik and Crist
with a memorandum outlining the idea. |
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Seeing a path forward,
Crist conducted several conference calls
in the months before Washington with Douglas,
Fitzgerald, Lindey, Matheson (left)
and Regan. That informal steering group
gave Aiello a mandate to assemble a meeting
to found what the CII had tentatively dubbed the ‘International
Corporate Governance Organization.’ |
| The 49 delegates
sitting around the Riverview Room did not know precisely
what to expect from the session. “I thought
there was a need, and that the people in the room would
figure it out,” recalls Lukomnik
(right). But there was “a general sense
of optimism that this was a very worthwhile and important
effort,” Howard Sherman remembers.
“It was also a treat to be around so many like-minded
people. While corporate governance today is accepted as
an important component of the investment process by a
growing number of market participants, it was still very
much in the vanguard in 1995.” |
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| The turning point
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Crist’s
first agenda item—to agree on a name for a new collaborative
body—proved a proxy for how far group members then
felt prepared to go. The new body would be principally
designed to share information, most asserted, not to set
joint international principles. So participants rejected
the word ‘organization’ as too ambitious.
‘Federation’ was considered. So was ‘council’
and ‘forum.’ Finally, following an epic two-hour
discussion, Pierre-Henri Leroy (left)
of Proxinvest suggested International Corporate Governance
Network, and delegates voted 19 to 10 in favour, with
the rest abstaining. The ICGN was born. |
“We
may not have known then what it would lead to,”
recalls IRRC (later Hermes) governance expert Corinna
Arnold, “but never again would governance
be seen from a purely parochial perspective. That was
a true turning point.”
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| Wary of handing any one existing organization
controlling influence over the group, speakers found consensus
that administrative responsibilities should be shared,
with only token costs assessed to members. They named
Douglas and Regan the
first co-chairs, asked PIAC to maintain a common member
list and a roster of governance documents, and tapped
UK colleagues to host the next annual meeting in London.
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| Arriving
back home in California, Crist hand-designed
interim stationery with clipart from his Macintosh computer,
and used it to nominate a small coordinating committee
to plan the London event, set for June 1996. He selected
CalPERS board member Robert Carlson, Ian Court
of Australia’s Conference of Major Superannuation
Funds, Douglas, Lindey, Birgit Malmenstam-Skytt
of Aktiespararma, Matheson, Regan and
John Richardson of the Laborer’s International
Union of North America. Crist, with
Aiello at the CII and Regan’s
staff at the ABI, handled much of the preparatory work,
all without charge. The ABI, in fact, absorbed all ICGN
administrative costs without charge until May 2000,
when the Institute of Chartered Secretaries and Administrators
was appointed as paid secretariat. But it was not until
the 1997 annual meeting in Paris, hosted by the SBF
Paris Bourse, that members adopted procedures for an
elected board.
That first Board of Governors comprised Crist,
Douglas, Marvin Hrubes of the United Food &
Commercial Workers Union, Kim Johnson
of the Colorado Public Employees’ Retirement System,
Malmenstam-Skytt, Matheson and
Regan. Hrubes, one of the most influential
architects of the ICGN, died in 2002.
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Developing the
Founding Principles
The ICGN’s appetite for acting
as something much more than an information-sharing network
swelled far more quickly than members at the Watergate
Hotel might have predicted when the majority emphatically
rejected playing a collective role as standard-setter.
Founding Principles drafted by Keith Douglas,
which members provisionally adopted on June 26 1996
at London’s Mount Royal Hotel, authorized the
ICGN to engage in “the development of corporate
governance guidelines.” And, just one year
later, delegates at the George V Hotel in Paris agreed
to generate standards of best practice in share voting
and governance in general. The Cross-Border Voting Committee,
first chaired by Davis, by then at
Davis Global Advisors, and Regan, produced
a text adopted at the 1998 annual meeting in San Francisco.
Baladi and Lukomnik
chaired the Working Group on Global Corporate Governance
Principles.
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With help from Caroline
Phillips of the Institute of Chartered Secretaries
and Administrators, later head of the ICGN Secretariat,
Leo Goldschmidt of EASD and Davis,
it produced breakthrough global governance guidelines
adopted at the 1999 meeting in Frankfurt. These achievements
came under the chairmanship of TIAA-CREF's Peter
Clapman (left), who succeeded co-chairs
Regan and Douglas. Still
later, Alastair Ross Goobey, former chief
executive of Hermes, chaired a taskforce
focusing on principles of executive remuneration before
taking over the chair from Clapman. |
Networking through
the annual conference
Though the ICGN evolved rapidly as
an advocate of best practices, the group’s central
identity in early years was as the convenor of the world’s
most international annual conference on corporate governance.
Attendees relied on the event to connect with others
in the new field, to exchange ideas, do business, and
strengthen ties born of common pressures, obstacles
and gains. ICGN meetings spawned various associations
to institutionalise cross-border cooperation among funds. |
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Nell Minow
(left) volunteered services of The Corporate Library to
establish an early internet presence for the ICGN so that
conference and working documents could be accessed worldwide.
But the conferences themselves absorbed enormous volunteer
time, effort and resources from paid-up members and an
extended family of ICGN supporters. André
Baladi was instrumental in identifying sites
for the conferences, and persuaded stock exchanges—initially
the SBF Paris Bourse and Deutsche Börse—to
host ICGN events. These acts set a pattern of ICGN partnership
with stock exchanges as sponsors. |
| From the Network’s
earliest days, two objectives animated all planning.
First, program committees selected topics and speakers
to draw the widest possible geographic representation
and ICGN membership—particularly as governance
reform spread throughout the world. Second, both the
annual event and the growing between-conferences work
program stressed the ICGN’s primal mission of
protecting the rights of shareowners in corporate governance
around the world “so that economies can best
prosper,” as the 1999 ICGN Principles statement
put it.
An enduring legacy
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perseverance is due in large measure to the core of global
funds and other financial institutions—representing
more than $15 trillion in assets on the 10th anniversary
of the founding meeting—that sustain it. The organization
is also the legacy of many individuals—those working
in civil service funds, trade unions, professional associations,
as private investors, service providers or corporate officials—who
have devoted untold energy to its success in the decade
following Crist’s March 29 1995
call to order in Washington. "The Network owes
its existence to many dedicated individuals,"
sums up chairman Alastair Ross Goobey (right).
"As always, success has a thousand fathers, but
I am confident that this narrative accurately reflects
the various contributions made, for which we, following
in the wake of the pioneers, will remain eternally grateful."
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