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Divided SEC proposes investor access plan (AP)WASHINGTON – Federal regulators on Wednesday proposed making it easier for shareholders to nominate directors for ballots of public companies, a change that could give shareholders more say over compensation packages for executives and risk controls.The Securities and Exchange Commission, split 3-2 along party lines, voted to open the proposal to public comment. The plan would allow groups who own a certain percentage of a company's stock to put their nominees for director on the annual proxy ballot that is sent to all company shareholders. The change has been pushed by investors and governance advocates. The proposal would require different minimum levels of stock ownership according to the size of the company: 1 percent for the 700 biggest companies, and 3 or 5 percent for smaller ones. The shareholders would need to have held the stock for at least a year. Under the current system, dissident investors must wage costly proxy fights and appeal to shareholders at their own expense if they seek new directors on a company's board or a bylaw change. The crisis gripping the U.S. and global economies "has led many to raise serious questions and concerns about the accountability and responsiveness of some companies and boards of directors to the interests of shareholders," SEC Chairman Mary Schapiro said. "The time has come to resolve this debate." The SEC commissioners could formally approve a rule change sometime in the future. Schapiro has said the proxy access issue will be one of the most contentious addressed by the agency, and there was impassioned debate among the commissioners at Wednesday's meeting. Commissioner Kathleen Casey, a Republican who voted against a similar proposal in 2007, raised objections to the current one, as did GOP Commissioner Troy Paredes. In a stinging rebuke, Casey said the proposal would impose a "federal proxy regime" on state laws and represents "paternalism," with the SEC substituting its judgment for that of shareholders. The plan could have the effect of suppressing innovation and growth at companies outside the financial industry that played no role in the economic crisis, she said. But Democratic Commissioner Luis Aguilar said, "Now is the time, with the country demanding renewed accountability," for shareholder access to proxy ballots to be enhanced. Governance advocates and big investors like pension funds have bitterly protested the SEC's action in November 2007, on a 3-1 party-line vote, that allowed companies to deny disgruntled shareholders access to annual proxy ballots — making it more difficult and expensive for dissident blocs to elect their candidates to a company's board. "This is a great day for shareowners," Ann Yerger, executive director of the Council of Institutional Investors, said in a statement Wednesday. Business interests swiftly condemned the move. U.S. Chamber of Commerce official David Hirschmann called it "a gift for activist investors (that) will weaken corporate governance and harm investors." The Chamber, which represents more than 3 million businesses, "will continue to vigorously oppose any plan that allows groups to use the proxy process to promote narrow interests that do not serve the long-term goals of a company or its investors," Hirschmann said in a statement. Labor unions have been using shareholder resolutions to coerce companies into adopting proposals unrelated to financial performance, the Chamber has said. In a current fight over a company ballot, William Ackman, whose Pershing Square Capital Management hedge fund holds a 7.8 percent stake in Minneapolis-based Target Corp. is pushing five nominees for directors of the giant retailer. Ackman contends the board needs new perspective in retail and real estate to make Target more profitable. He's been trying to shake up the board since Target rejected Pershing Square's proposal last year to separate its stores and distribution centers from the land it owns underneath them. Target on Wednesday reported a 13 percent decline in first-quarter profit, but the results beat analysts' estimates because of cost-control measures. |