Durkin has often been out in front of major corporate governance issues. "He's a thinking leader and a catalyst for reform," says Peter Gilbert, head of investments at the Pennsylvania State Employee's Retirement System. BusinessWeek writers sat down with Durkin to a mid-September lunch of crab cakes at Charlie Palmer Steak in Washington, during which Durkin dug into the issues of the day, from hedge fund activism to efforts to weaken the controversial Sarbanes-Oxley corporate governance rules.Shareholder activists hail you as a leading investor advocate, but you're more self-critical. Why?
Workers' stock ownership is an important source of influence and power. But I don't know if we've done that good a job of using it. We've made progress, but in some ways I think we've sort of failed. Take the recent [H.J.] Heinz (HNZ
) situation. [Investor] Nelson Peltz takes a 5%, 6% position in Heinz and ends up with two people on the board. Worker pension funds in this country have trillions of dollars. I don't mean to say it should all translate into board seats, but maybe we haven't effectively utilized that to secure a greater say in the governance of these companies.You argue that labor should be viewed as a long-term investor.
The view of shareholder activism that has won out so far is the short-term approach. But there should be a broader view. We have stock in 3,500 companies, and we have a different investment horizon [from hedge funds and other short-term investors].In September a group of business thinkers formed to update Sarbanes-Oxley. What's your reaction?
Given the state of disarray in corporations, [SarbOx] was a good reform. Pushing back at that is problematic. Obviously there's a cost to [SarbOx]. But spending money on things has not always been a problem for boards.Like CEO compensation, for example.
Executive pay is one of the most frustrating issues. It's like the [whack-a-mole] carnival game where you hit one and [another] pops up.Do situations like the one at Hewlett-Packard (HPQ
) make you worried that companies still aren't run properly?
You can't legislate against stupidity. We can come up with 10 examples where boards are not working, but there is greater accountability [today]. I remember Dwayne Andreas at Archer Daniels Midland (ADM
) telling me [at an annual meeting]: "Sit down. I own this microphone." You don't have much of that anymore.Other unions are pushing for proxy access -- the chance for investors to nominate directors. Why aren't you?
It's the hedge funds that will use it. Free riding on the company's proxy is not the next best step in election reform.You usually work with companies to get them to make changes without an annual-meeting showdown. Do other investor activists think that's too chummy?
Traditional investor activism has been narrow-minded. Shareholders want management and boards to look over both shoulders. We think that leads to a short-term approach. We've prompted more constructive reform over the past six years than any other group. The numbers show it. The labor instinct is to be combative, but it's also one of compromise. By Nanette Byrnes