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Non-Tech : The Enron Scandal - Unmoderated -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (2713)	7/7/2003 7:03:33 AM
From: Glenn Petersen	Read Replies (1) \| Respond to of 3602

Corporate 'Democracy' on Trial Before SEC story.news.yahoo.com Sun Jul 6,11:43 AM ET By Kevin Drawbaugh WASHINGTON (Reuters) - Every spring across America, the ritual of "shareholder democracy" plays out at thousands of corporate annual meetings. Nominations for members of the board of directors each year come before shareholders for a vote. Usually, all the nominees have been chosen by management. The votes are cast, the ballots are counted, and at the end of the meeting, the results are announced. It's almost always the same -- the management slate wins. Then it's on to the punch and doughnuts, and good-bye until next year. Investors, with no realistic way to challenge management, have tolerated this for decades. But now -- after a brutal bear market and a series of corporate scandals -- that may change. The U.S. Securities and Exchange Commission (news - web sites), in its first hard look at the issue since 1977, is considering ordering that shareholders be given access to the corporate proxy statement to nominate their own board of directors candidates. The SEC's Corporation Finance division must report on the issue to the commission by July 15. After that, said sources familiar with the matter, the SEC is likely to write new rules before year-end, in time for the 2004 proxy season. "My guess is we will see something. The question is, what will it be, and how far will it go?" said Stanley Keller, partner at the law firm of Palmer & Dodge in Boston and a prominent securities law attorney. The proxy statement usually takes the form of a pamphlet sent to shareholders before the annual meeting. Written and distributed by management, it includes the names of director nominees. Management can -- and regularly does -- exclude from the proxy outside proposals to which it objects, including shareholders' nominees. FEW ATTEMPT OWN NOMINEES In some cases, shareholders may nominate their own candidates for the board. But since the nominees' names don't appear in the proxy, shareholders have to arrange and finance their own campaign materials -- a project that is so costly and complicated that very few shareholder groups attempt it. "What you have right now is a hollow system," said William Patterson, director of the Office of Investments at the AFL-CIO, the union coalition that is among investor and investor activist groups backing shareholder proxy access. "Access to the proxy would allow shareholders to have their own representatives on the boards of poorly performing companies that will not respond to any other sort of pressure," said Patterson, who is scheduled to meet next week with SEC Chairman William Donaldson to discuss the matter. The prospect of shifting boardroom politics toward a more directly democratic model is throwing America's powerful CEOs, accustomed to hand-picking directors, on the defensive. The Business Roundtable, a corporate CEOs lobbying group, warned the SEC in a recent letter of "potentially unintended consequences" from opening the proxy to shareholders. The group urged the SEC to let other recent reforms take hold, such as the Sarbanes-Oxley rules ordered by Congress last summer. But some of the nation's biggest public pension funds, along with investor advocates at unions, universities and consumer watchdog groups, are gearing up for a fight. "The history here is that the feelings on this issue can be very intense and it's very hard to find the center line," said David Martin, partner at the law firm of Covington & Burling and former director of the SEC's Corporation Finance division. Among options likely to be evaluated by the commission are limiting which shareholders may have proxy access, based on the size or tenure of their shareholdings, as well as limiting the number of shareholder nominees allowed to one or two per year. "Whatever choice the SEC makes, they're going to make somebody unhappy," said Peter Romeo, partner at the law firm of Hogan & Hartson and a former Corporation Finance official.