The SEC Wants To Revise The Proxy Process
Monday, May 07, 2007SUZANNE PRATT: Traditionally on Wall Street, proxy voting at a company's annual meeting was a cut and dried process with shareholders generally voting as management instructed. Not anymore. These days, shareholders are using the proxy process to voice displeasure with management on issues ranging from CEO pay to global warming. And as Stephanie Dhue reports, the Securities and Exchange Commission is considering how to update the process.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: From Carl Icahn's demand for a new strategy and a seat on the board of Motorola, to reining in CEO pay, shareholders are increasingly using the proxy process to force change. The Securities and Exchange Commission today began a review of that system. SEC Chairman Christopher Cox says he wants to make sure the proxy process works for investors.
CHRISTOPHER COX, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION: We want to make sure that system is working well. We want to make sure that the directors are responsive to the shareholders, that the shareholders as owners of the company have rights. This is an old system that's been in place for a long time. We're taking a top to bottom look at how it's functioning in this new world of hedge funds and global investing.
DHUE: Activists want the SEC to clarify that investors can use the corporate proxy process to nominate candidates to a company board. Ann Yerger represents institutional investors. She says the key issue is upholding shareholder's rights.
ANN YERGER, EXEC. DIR., COUNCIL OF INSTITUTIONAL INVESTORS: What's happened through shareholder proposal rules has been so profound in the past few years, from majority voting for directors, accounting for stock options, executive pay-related issues, these have all bubbled to the surface through shareholder proposals. So I think it's very important that this tool remain open, vibrant and current so that owners can exercise their rights.
DHUE: But many businesses don't want to make it any easier for shareholder activists to get a seat on corporate boards. Columbia law school Professor Jack Coffee says it's an issue of control.
JACK COFFEE, SECURITIES LAW PROFESSOR, COLUMBIA LAW SCHOOL: Any time you begin to, even at the margin, reallocate the balance of power between managers and shareholders, you get the board of directors and you get America's managers very nervous and thus this commission is probably quite divided over this issue.
DHUE: The SEC is expected to introduce new rules this summer and should have a proposal finalized before the start of next year's proxy season. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
