CEOs, Shareholders and Labor Groups Sign Historic “Aspen Principles” Committing to Long-Term Value Creation and Increased Executive Compensation Accountability
NEW YORK – An influential group of CEOs, business organizations, institutional investors, labor unions, corporate lawyers, accountants and consultants have signed off on a set of guiding principles that commits them to encouraging and implementing long-term management and value creation strategies.
The signing of the four-page document by twelve members of The Aspen Institute Corporate Values Strategy Group is the culmination of a two-year process spearheaded by The Aspen Institute Business and Society Program in collaboration with the Council of Institutional Investors and the Business Roundtable, an association of chief executive officers of leading U.S. companies with $4.5 trillion in annual revenues and more than 10 million employees.
It was prompted by concerns about the growing corrosiveness that short term pressures are having upon publicly traded companies and rising public sentiment against executive compensation.
The document is formally titled “Long-term Value Creation: Guiding Principles for Corporations and Investors,” and its adoption has historical significance, according to Judith Samuelson, Executive Director of The Aspen Institute Business and Society Program.
“This is an important step forward in managing for the long term,” said Samuelson. “We’ve built these principles on the foundation laid by many other organizations and individuals. What we have added to their efforts is the commitment of diverse stakeholders to work together to change business practices, investment practices and policy in support of long-term competitiveness.”
Dubbed “The Aspen Principles,” the four-page document has garnered the following signatures, with other organizations poised to sign in upcoming weeks:
Business Roundtable (BRT is an association of chief executive officers of leading U.S. companies with $4.5 trillion in annual revenues and more than 10 million employees)
Council of Institutional Investors
Center for Audit Quality (representing the audit profession)
NY State Common Retirement Fund
William H. Donaldson, Donaldson Enterprises, Inc
Patrick W. Gross, The Lovell Group
Ira Millstein, Wiel, Gotshal & Manges, LLP and Senior Associate Dean, Corporate Governance, Yale School of Management
John Olson, Gibson, Dunn & Crutcher, LLP
Henry B. Schacht, Warburg Pincus
“The signing of the Aspen Principles by such a diverse group is a milestone in business history,” said Anne Mulcahy, chairman and chief executive officer of Xerox Corporation, and chair of the Business Roundtable corporate governance task force. “What’s especially significant is the focus on long term value and opening lines of communication with shareholders.”
Damon Silvers, Associate General Counsel of the AFL-CIO, noted that “It is critical for investors, companies, and our country that management and investors can come together in this way, in support of our common interest in the long-term business perspective. The AFL-CIO is very pleased to have been involved, and looks forward to continued participation in this process going forward.”
Key Provisions of The Aspen Principles call for:
- Companies to stop providing quarterly earnings guidance to analysts, and to not respond to analyst estimates.
- Corporate boards to communicate with “long-term oriented investors” on senior executive compensation.
- Requiring senior executives to hold stock they are given for at least some period beyond their tenure with the company, thus tying them to the long-term growth of the company.
- Banning senior executives from hedging the risk of stock options of long-term oriented compensation.
- Providing for “clawbacks,” which involve recouping senior executive compensation that was awarded based on the achievement of performance targets that were subsequently slashed or wiped out by corporate financial restatements.
About the Aspen Institute:
The Aspen Institute Business and Society Program (BSP) is dedicated to developing leaders for a sustainable global society. Through dialogues and path-breaking research, BSP creates opportunities for executives and educators to explore new pathways to sustainability and values-based leadership.