The Fight for Shareholder Rights Suffers A Setback
Wednesday, November 28, 2007JEFF YASTINE: A setback for shareholder rights at the Securities and Exchange Commission today. The agency voted three to one to keep a long- standing rule letting companies deny shareholders access to corporate proxy ballots. Shareholder activists are fighting for the right to nominate board directors and as Stephanie Dhue reports, despite today's decision, those activists are keeping up the fight.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The issue of proxy access has been a political hot potato at the Securities and Exchange Commission for years. SEC Chairman Christopher Cox tried to find a compromise that would give shareholders greater access to corporate proxies to nominate board directors. But with two Republicans and only one Democrat now at the SEC, there was no compromise to be had. Cox says the vote today creates certainty for the upcoming proxy season.
CHRISTOPHER COX, CHAIRMAN, SECURITIES AND EXCHANGE COMMISSION: Until a majority of the commission sees fit to create broader proxy access for shareholders than presently exists, the best we can do is to clarify that the status quo maintains.
DHUE: The lone Democrat on the panel, Annette Nazareth, blasted the majority decision, saying it denies shareholder rights indefinitely.
ANNETTE NAZARETH, COMMISSIONER, SEC: Ultimately, our votes here today are the actions that matter and not the unenforceable aspirations that we have for change.
DHUE: Shareholder activists are moving to keep the issue alive this proxy season. Today, JPMorgan and Bear Stearns became the first targets of the American Federation of State, County and Municipal Employees Union. The union filed shareholder proposals to open the proxies at those companies. Richard Ferlauto heads up the effort for the union. He says if JPMorgan and Bear Stearns resist, AFSCME will challenge them in court.
RICHARD FERLAUTO, DIRECTOR, AFSCME: We believe that the action that the SEC took today was ill-considered and fatally flawed in the procedures that they went through in coming to the rule and therefore we would prevail in court. And the court would force the companies to put these shareholder proposals on their ballots and essentially we would invalidate the actions that the SEC took today.
DHUE: Corporate attorney John Olson doubts shareholder activists will succeed in court.
JOHN OLSON, ATTORNEY, GIBSON, DUNN, AND CRUTCHER: There's a part of me that says they kind of like having this issue alive and kicking, so they can beat the commission up with it and keep their attention focused on the future.
DHUE: Chairman Cox promises to continue to work on the issue and hopes to have it resolved in time for the 2009 proxy season. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
