The Corporate Monitoring Newsletter
Issue #16 - August 2003
Written by Mark Latham
IN THIS ISSUE:
1. New paper – “Vote Your Stock”
2. U C Berkeley Corporate Governance Conference Sept 14-16
3. SEC Lets Management Exclude Shareowner Proposals
4. SEC Considers Changing Proxy Rules
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1. NEW PAPER – “VOTE YOUR STOCK”
We can break the board of directors’ monopoly on convenient voting advice for individual investors, by building a website with options like “Vote all my stock the way CalPERS votes its stock.” The same tool can also let individual beneficial owners take voting authority for stocks held for them by institutional investors. This paper shows the benefits of such a power shift, and the future changes it will make possible.
See www.corpmon.com/publications.htm – link “Vote Your Stock”
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2. U C BERKELEY CORPORATE GOVERNANCE CONFERENCE SEPT 14-16
The University of California at Berkeley’s Haas School of Business will present a conference on corporate governance next month, September 14 to 16, at Sonoma Mission Inn north of San Francisco. This is the latest in their Berkeley Program in Finance semiannual series for institutional investment managers, fund sponsors and financial advisors. I will co-chair the conference with Haas School Professor Terrance Odean. Speakers include Charles Elson, Florencio Lopez-de-Silanes, Patrick McGurn, Kenneth Bertsch, Bernard Black and Andrew Shapiro.
Details on the web at: execdev.haas.berkeley.edu/ApplicationFiles/web/WebFrame.cfm?web_id=120
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3. SEC LETS MANAGEMENT EXCLUDE SHAREOWNER PROPOSALS
In March 2003, the U.S. Securities and Exchange Commission issued “no-action letters” allowing management to omit from the company- mailed proxy three shareowner proposals I had submitted to Visteon, USG and Cleveland-Cliffs. The proposals and no-action letters are available at www.corpmon.com
The “Voting Leverage” proposal to Visteon requested the board to study and report on the feasibility of enabling individual investors to copy the voting decisions of institutional investors, as described in item #1 above. The SEC let management omit this proposal because it relates to board elections. The harm of relating to board elections is far from clear, but the SEC rule 14a-8(i)(8) prohibits it. I recommended a review of this rule in a comment letter on June 11, available at www.sec.gov/rules/other/s71003/corporatemp061103.htm
The “Auditor Reputation” proposal to USG and Cleveland-Cliffs requested the board to “conduct an annual poll of auditor reputation, so as to encourage auditors to build their reputations for serving shareowner interests”. The SEC let management omit this proposal because it relates to “ordinary business matters”, a nebulous concept that seems to mean whatever the SEC decides at the time. I likewise recommended a review of the ordinary business rule in my June 11 comment letter at www.sec.gov/rules/other/s71003/corporatemp061103.htm
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4. SEC CONSIDERS CHANGING PROXY RULES
Following pressure from shareowner groups, in April 2003 the SEC launched a review of the proxy rules that govern shareowner voting, especially the rules for nominating director candidates. They seem to be seriously considering requiring management to include shareowner- nominated board candidates in the company-mailed proxy ballot, under restricted circumstances.
SEC announcement inviting public comment: www.sec.gov/rules/other/34-47778.htm
My comments: www.sec.gov/rules/other/s71003/corporatemp061103.htm
All public comments: www.sec.gov/rules/other/s71003.shtml
This month (on August 6) the SEC proposed requiring disclosure of board nominating committee functions and communications between shareowners and boards: www.sec.gov/rules/proposed/34-48301.htm
My comments: “I am concerned that this proposed rule lacks substance, and may cause more substantial and worthwhile rules not to be passed.” www.sec.gov/rules/proposed/s71403/corporatemonit081303.htm
All public comments: www.sec.gov/rules/proposed/s71403.shtml
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