Cassie of course we will need your real name LOL...
SEC OKs Plan to Open Proxy Door for Shareholders
Wednesday, October 08, 2003
WASHINGTON — The Securities and Exchange Commission (search), moving to give investors more power to shape corporate boards (search), gave initial approval Wednesday to a plan that lets shareholders place nominees on the official ballots sent to all shareholders.
The commission's unanimous decision sent the proposal out for 60 days to receive comments from the public, with a final vote to follow on a plan that is being resisted by big business and championed by investor activists.
"This is going to be a very controversial proposal ... No matter what we do or doetings for voting on directors and key corporate governance issues.
Resolutions and nominees by shareholders are routinely excluded from the proxy by management. As a result, at most annual meetings, shareholders vote solely on nominees for director seats that have been hand-picked by management.
If the SEC proposal wins final adoption later this year, managers in 2005 would have to start letting shareholders put their own nominees for director seats in the proxy statement if one of two "trigger" events occurs.
One trigger would be the putting forth of a demand for proxy access by a shareholder, or group of shareholders, owning at least 1 percent of voting shares outstanding for at least a year, and a subsequent favorable vote on the demand by more than 50 percent of the votes cast on it, the SEC said.
The other trigger would be when 35 percent or more of votes cast on one or more director nominees were "withhold" votes.
"This is a proud and historic day at the commission. We're in the process of shifting the balance of power between corporate managements and shareholders. No longer will managements be able to ignore dissatisfied majorities of shareholders," said SEC Commissioner Harvey Goldschmid.
If a trigger is tripped, the company would have to open its proxy to a shareholder nominee only if the nominating shareholder or group of shareholders has owned more than 5 percent of outstanding shares for two years or more and intends to hold its stake through the next annual meeting.
Nominating shareholders also would have to show through SEC filings that they don't intend to take over the company. In addition, the shareholder nominee would have to be independent from those making the nomination and from the company.
The number of shareholder nominees a company would have to put in the proxy would be limited to one for a board with eight or fewer directors; two for a board with nine to 19 directors; and three for a board with 20 or more directors.
Foreign companies traded publicly in the United States would be exempt from the proposed rules, the SEC said.
Corporate lobbyists have complained the SEC proposal could be divisive and costly, damaging business efficiency.
SEC Commissioner Paul Atkins, while voting with his colleagues to move the proposal forward, raised concerns about possible legal challenges based on state law complications.
Investor activists support the proposal and some want it to go further, arguing shareholders need more clout to wrest control from managers of rubber-stamp boards like those that failed to prevent the scandals at Enron Corp. (search) and elsewhere.
