SEC to look outside ballot on proxy access
WASHINGTON (Reuters) - Electronic shareholder forums, e-proxies and other technological approaches may be among the inventive ways that the U.S. Securities and Exchange Commission tries to refocus the debate in 2008 over how to give shareholders more power to nominate directors.
Investor advocates have long considered access to the company's ballot the "holy grail" of shareholder rights but the SEC's three Republican commissioners recently rejected a plan that would have led to the opening up of that ballot.
SEC Chairman Christopher Cox said even though he voted to deny access, he was not happy where it left shareholders and would take another look at the issue in 2008.
Most academic and industry experts say the tough political nature of the issue and a lack of compromise among SEC commissioners will prevent the passage of a rule this year that opens up the company ballot.
"I don't think this issue is going to see much progress until we have a presidential election," said John Coffee, a professor at Columbia Law School.
Cox's options to try to vindicate himself as a supporter of shareholder rights include some Internet-oriented approaches, according to experts who cite Cox's interest in technology.
"He's been a big advocate of technology as a tool for investors to use," said Claudia Allen, an attorney who chairs the corporate governance practice group at law firm Neal Gerber & Eisenberg. "Some of the recent changes in rules do facilitate shareholders making their opinions and views known as well as heard."
For example, the SEC could encourage companies to make broader use of so-called e-proxies. The agency approved a rule one year ago allowing annual corporate proxy materials to be posted online, reducing high printing and mailing costs.
Cox could also press for the creation of electronic shareholder forums. The SEC last month agreed to encourage such forums as a way of letting shareholders communicate with the company and with each other without running afoul of securities regulations.
Former SEC Chairman Harvey Pitt said the e-proxy and electronic forums could make it easier and cheaper for shareholders to run independent campaigns to nominate directors.
"I believe the whole e-proxy initiative is one that may make a lot of these issues about shareholder access moot," said Pitt. "If people have an inexpensive way to solicit proxies, that's going to reduce a lot of the tension that exists at the present."
But members of the shareholder activist camp don't agree. Nell Minow, co-founder of the Corporate Library, a research group that tracks companies' governance practices, said it's too early to see exactly how these technological innovations will be used but doubts that companies will allow them to become effective vehicles for shareholder-driven change.
"Certainly this is not a problem that can be solved with technology," Minow said.
"Companies will still fight and will provide obstacles."
William Donaldson, the former SEC chairman who preceded Cox and who fought during his tenure to broaden proxy access, said technological innovations are not the same as direct access to the corporate ballot. Continued...
