Cheers to Harvard Professor Lucien Bebchuck for his stirring op-ed on proxy access. He makes the key points that this last-minute effort to gut the provision by imposing and insurmountable threshold (a) inserts (presumably corporate-authored) language to replace provisions where there was no conflict between the House and Senate versions so it was acceptable as it was and (b) makes proxy access into a tool that can only be used by raiders who are just as likely to exploit shareholders as corporations are.
Any reform of corporate elections should include ending incumbents’ monopoly over the corporate ballot — the proxy card sent by the company at its expense to all shareholders. Only board-nominated candidates get to appear on this ballot; challengers must bear the costs of sending (and getting back) their own proxy card to shareholders. Providing shareholders with proxy access — the right to place candidates on the ballot — would contribute to leveling the playing field.
Managements have long opposed proxy-access reform and have thus far succeeded in blocking it. In the wake of the financial crisis, however, the Securities and Exchange Commissionproposed a proxy-access rule and seemed determined to adopt it this year. Because business groups threatened to challenge in court the S.E.C.’s authority to adopt such a rule, the Senate and the House bills sought to support the agency’s reform by affirming this authority. Under the senators’ amendment, however, the financial regulation legislation would not merely affirm the S.E.C.’s authority but rather severely limit it.
The proposed amendment cannot be viewed as an attempt to reconcile the Senate and House bills. These bills were largely identical in affirming the S.E.C.’s authority and leaving the design of a proxy-access rule to S.E.C. rule-making. Rather than reconciling different arrangements found in the Senate and House bills, the amendment would replace an identical arrangement appearing in both bills with a different arrangement appearing in none.
If adopted, this new arrangement would largely eliminate the benefits that proxy-access reform could provide. A 5 percent ownership threshold would make the proxy provisions largely useless for the main set of investors whose involvement the proxy-access reform is intended to facilitate. (Emphasis added)
Congress has vowed to get tough with financial companies. But not so tough that members won’t eagerly solicit and accept their campaign contributions. While the House and Senate have been wrestling over financial reform legislation, members of the relevant committees have found time to conduct more than 800 fund-raising events.
The tawdry symbiosis is so routine that some members are crying foul about a preliminary investigation by the House’s new independent ethics watchdog.
Shareholders should make sure that Congress and the White House know how important proxy access and majority vote are to them. And then they need to let corporations know that boards who think that it is an appropriate use of shareholder funds to promote policies that are not in our interests will not be permitted to continue to serve.
Nell Minow - Editor
