Congress is currently considering whether to incorporate into financial reform legislation a variety of corporate governance changes. One such change under consideration involves directing the Securities and Exchange Commission to formulate rules allowing broader access to issuer proxies with the intention of permitting dissident shareholders to nominate alternative candidates for corporate boards. ABC has already filed a comment letter to the SEC on this matter. We also address the issue –and our skepticism about Congress enacting corporate governance “reforms” — in this letter to Senator Michael Crapo of the Senate Banking Committee.
Posts Tagged ‘SEC’
Proxy Access and Midsize Companies
Friday, March 12th, 2010More on Client Directed Voting
Tuesday, March 2nd, 2010The American Business Conference (ABC) continues to press the need for policies to encourage individual shareholders to take a more active role in the governance of the corporations whose stock they own. One way for that to happen is through the implementation of client directed voting (CDV). This article, published in the Harvard Law School’s Forum on Corporate Governance and Financial Regulation and written by Frank Zarb, Jr., a Washington securities attorney, and ABC’s president, John Endean, makes the case for CDV yet again.
Judge Throws Out Bank of America Settlement
Tuesday, September 15th, 2009U.S. District Court Judge Jed Rakoff has rejected in the strongest possible terms a proposed settlement between the Securities and Exchange Commission (SEC) and the Bank of America over BofA’s alleged failure to disclose $3.6 billion of bonuses paid to Merrill Lynch employees shortly before BofA acquired Merrill. The settlement amounted to a $33 million fine to be paid by BofA.
Judge Rakoff’s decision to throw out the settlement agreement was based on an elementary sense of fairness. In his view, shareholders, having been obliged to pay the Merrill bonuses, were now being asked to pay the fine as well. Judge Rakoff quite properly interpreted the settlement as a evidence of a “cynical” relationship between the Commission and BofA management, whereby the Commission would claim a much-needed enforcement trophy, BofA would avoid further investigation, and the check would be picked up by the shareholders.
Judge Rakoff’s opinion points up the problem that few others in this age of good corporate governance tackle: namely that the cost of many feel-good reforms is inevitably borne by the shareholders for whom so many corporate governance experts and regulators cry crocodile tears.
Perhaps we can begin now to think about corporate governance reform as something other than a free good and evaluate proposals in that light. After that, maybe we can advance to another related matter: that people, not corporations, pay taxes and that efforts to stick it to corporations inevitably result in the costs being borne by individuals.
Proxy Access: A Bad Idea Whose Time Has Come
Thursday, September 3rd, 2009The Securities and Exchange Commission has proposed to change the federal proxy rules so as to require a public company under certain circumstances to include in its proxy materials a shareholder’s or group of shareholders’ nominees for director. This “proxy access” rule has been a kind of holy grail for large institutional investors, particularly union pension funds, as well as, more quietly, for certain hedge funds. It is virtually certain that the Commission will adopt some version of its proposal.
ABC opposes the SEC’s proxy access proposal and our comment letter explaining our pespective can be found here.
Wal-Mart and Health Care
Thursday, July 2nd, 2009Professor Bainbridge makes some excellent points about Wal-Mart’s new romance with the prospect of an employer “pay or play” mandate for health care. In so doing, he touches upon Wal-Mart’s longstanding status as a target for labor organization and its apparent hope that by endorsing “pay or play” the company can stave off the unions.
Unfortunately, there’s nothing at all untypical about this. Businesses commonly employ lobbying strategies that embrace for their own parochial purposes policies not in the general business interest.
Madoff Gets 150 Years
Monday, June 29th, 2009In my younger and more vulnerable years, I worked for a Fortune 50 communications company. I once asked my boss, who was a big guy in the company’s Manhattan bunker if he traded options in the company. He looked at me in disbelief. “Trade in puts and calls in our stock?” he said. “That’s go to jail time, baby.” (more…)
Restoration of the Uptick Rule
Friday, June 19th, 2009The Securities and Exchange Commission (SEC) is contemplating the reimposition of price-based restrictions on short selling, commonly called uptick rules. The SEC eliminated uptick rules just two years ago, following a painstaking, seven-year study of the matter. (more…)
ABC Article on Client Directed Voting
Thursday, April 16th, 2009While institutional investors in public companies typically vote their shares, often with the help of proxy advisers, individual investors with brokerage accounts typically do not vote. In fact, the rate of individual shareholder voting is today at an all time low, a problem that is beginning, justly, to worry observers at the Securities and Exchange Commission as well as the leaders of small and midsize companies whose shares are disproportionately owned by individuals compared to the ownership patterns found among big businesses.
To address the problem of the low rate of individual shareholder voting, ABC supports the establishment of Client Directed Voting or CDV. We describe this proposal in a recent article in Directors and Boards, which can be accessed here.