It’s one of the principal and most-respected corp gov groups out there, of course, and one of the only ones that advocates for investors, for that matter. For portfolio managers that have at least a casual interest in activist investing, it’s worth a bit of your time getting to know the Council of Institutional Investors.

They emphasize pure corp gov improvements for their own sake, lately majority voting in BoD elections, at the expense of more mundane goals like alpha and beta. But, hey, someone has to do it.

“The Voice of Corporate Governance”

The CII has 127 members, all pension and investment funds of various types. About half are government employee pension funds like CalPERS, with another 20% union pension funds like the AFL-CIO. The rest are corporate pension funds (Chevron, PepsiCo) and charitable foundations. Today, they together have over $3 trillion in AUM.

At its founding in 1985, the CII consisted of 22 government employee pension funds, led by CalPERS. They got together to influence corporate management in an era of greenmail and corporate takeovers. Since then, CII has added corporate funds and also many dozens of adjunct members, like attorneys, proxy solicitors, and proxy advisors. Many hedge funds and other asset managers also participate, looking for an allocation from the institutional investor members.

Today, the CII retains elements of its original mission and feel. It serves mostly as a lobbying and educational organization, on behalf of improved corp gov at US companies. While it covers a range of corp gov and other financial regulatory subjects, in recent years it spent a decent share of its energy on advocating for majority voting for the BoD (on which more below).

CII does weigh in on other issues, including exec comp reforms, independent BoD chair, and proxy access. It has extensive policies on all issues, and lobbies Congress and the SEC on behalf of its position.

CII also gets in the face of corporate management. Over the years it has met with numerous companies on poison pills, BoD entrenchment, exec comp, and many other corp gov problems. Lately, it identifies a few big companies that repeatedly fail to respond to investor entreaties to implement majority voting. CII members then meet with these companies to push this issue.

Like many other Washington, D.C.-based advocacy groups, CII also has an educational mission. They have a decent research library, regular newsletter, and popular semi-annual conference.

Conference Attracts Major Names

The CII organizes good meetings, and not only because they kindly invited me to speak on a panel at their most recent one, last week in Chicago. Last week’s meeting also featured SEC Chair Mary Jo White and a colloquy with Nell Minow and Richard Koppes, two corp gov luminaries.

The spring conference included Ron Burkle of Yucaipa, activist investor Barry Rosenstein of JANA Partners, and a debate between professors Charles Elson and Lynn Stout on shareholder value. Dan Loeb was scheduled to speak with Rosenstein, but cancelled after an uproar over his support of educational reforms that offend some CII members.

Earlier editions have featured Carlyle founder David Rubinstein, Goldman Sachs CEO Lloyd Blankfein, Treasury Secretary Henry Paulson, Vanguard founder John Bogle, and Clinton economic advisor Laura Tyson, among others.

At last week’s conference, in a compact day-and-a-half, over 400 members and guests attended speeches, seminars, and break-out sessions on a range of subjects. Members heard from a director from JPMorgan Chase and a senior partner from Bain Capital, with tough questions all around. Our panel discussed small cap activist investing, a useful area to CII members since most of their funds focus primarily on large cap companies.

Majority Voting Over All

Clearly, the idea that in an uncontested election a director can win with as little as a single vote really annoys CII members. While the CII addresses many corp gov issues and problems, majority voting has a prominent place on its Internet real estate.

We’ve explained the idea behind majority voting before. While it makes good sense as an abstract guiding principle, the arcane detail makes it difficult to implement and enforce. We can’t find conclusive evidence that companies that adopt majority voting deliver alpha, either. We concluded awhile ago that most investors probably won’t and shouldn’t care that much about it. We’ll address majority voting again in a future missive.

CII offers the institutional perspective on corp gov. While they have different priorities from hedge funds, their research and approach makes them an essential stop for any portfolio manager whose activism includes corp gov issues.