The Corporate Monitoring Newsletter

Issue #4 - October 1999

Written by Mark Latham

IN THIS ISSUE:

1. Shareowner proposal ready to go!

2. Text of proposal
_____________________________________________________________

1. SHAREOWNER PROPOSAL READY TO GO!

It's time to submit shareowner proposals -- deadlines for
many companies are in November. Below is a proposal to have
independent proxy voting advice paid for by the company,
including the reasons why this will benefit investors.

Submit it to a company in your portfolio -- it's easy!
All you need is $2000 of stock held in a U.S. corporation
for the last year. Contact me for step-by-step advice.
[email address out of date] Someone would need to attend
the annual meeting next year -- I can attend for you if you
prefer. It has already been submitted to one company (Whole
Foods Market), which has an early deadline.

The latest revision is kept updated on the web at
http://www.corpmon.com/HirePAF.htm

Frequently Asked Questions (& answers) are at
http://www.corpmon.com/ProposalFAQ.htm

Progress of this campaign will be reported at
http://www.corpmon.com and in future newsletter issues:
which companies have proposals submitted, which put the
proposal on the management proxy, discussion on the merits
of the idea, and results of shareowner votes at annual
meetings next spring.
_____________________________________________________________

2. TEXT OF PROPOSAL:

HIRE PROXY ADVISORY FIRM CHOSEN BY SHAREOWNER VOTE

WHEREAS many shareowners lack the time and expertise to make
the best voting decisions, yet prefer not to always follow
management's recommendations because of management's possible
conflicts of interest;

WHEREAS proxy advisory firms have established reputations for
giving sound independent advice to many institutional
investors on how to vote their shares;

WHEREAS shareowners have a common interest in obtaining sound
independent advice, but often insufficient private interest
to justify paying for it individually (the "free-rider"
problem);

THEREFORE BE IT RESOLVED that the Company hire a proxy
advisory firm for one year, to be chosen by shareowner vote.
XYZ* shareowners request the Board of Directors to take all
necessary steps to enact this resolution in time to hold the
vote at next year's shareowner meeting, with the following
features:

To insulate the selection of the proxy advisory firm from
influence by Company management, any proxy advisory firm can
put itself on the ballot by paying an entry fee (for example,
$1000) and declaring the price for its advisory service for
the coming year. The price can be no more than $5000. (The
entry fee is refunded to each candidate receiving over 5% of
votes cast.) The winning candidate is paid its declared
price by the Company, and is expected to make voting
recommendations freely available to all Company shareowners
for the subsequent year. Fulfillment of that expectation is
not policed by Company management, but rather by loss of
reputation and future business if performance is
disappointing.

The decision of whether to hire proxy advisory firms in later
years is left open, and can be decided by future shareowner
votes.

Supporting Statement:

This proposal will enhance management accountability to
shareowners by making professionally researched advice
available to all. It will effectively enfranchise individual
investors for the first time, ensuring that a majority of
shares can be voted independently of management's
recommendations. The company-pay system will encourage
greater competition among proxy advisory firms to serve
shareowner interests, and the increased impact of their
advice can be expected to improve the return on XYZ* stock.

Proxy advisory firms such as Proxy Monitor
(http://www.proxymonitor.com), Institutional Shareholder
Services (http://iss.cda.com), and Investor Responsibility
Research Center (http://www.irrc.org) are frequently cited in
the financial press. Examples are "Venator Holders Are Urged
To Support Dissident Slate" (Wall Street Journal 07/06/1999),
"Investor Activists Await New Legal Test On Binding Votes"
(Dow Jones Newswire 09/24/1999), and "ISS's Influence Grows
In Proxy, Option Matters" (Wall Street Journal 11/10/1997).

Articles discussing the company-pay system for proxy advice
are on the Corporate Monitoring website
(http://www.corpmon.com/publications.htm). These include
"Collective Action for Dispersed Shareowners" (Corporate
Governance International, September 1999) and "The Internet
Will Drive Corporate Monitoring" (Gouvernance, Winter 2000).
Further developments in corporate governance that may follow
from this company-pay system are presented in "The Corporate
Monitoring Firm" (Corporate Governance: An International
Review, January 1999) and "Corporate Monitoring: New
Shareholder Power Tool" (Financial Analysts Journal,
September/October 1998).

* Replace "XYZ" with the name of the company.

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