Funds News

Pension funds seek US SEC halt on proxy proposals

WASHINGTON, Nov 19 (Reuters) - Institutional investors urged the U.S. Securities and Exchange Commission on Monday to refrain from acting on two proposals that would determine ways shareholders can nominate directors using a corporate proxy.

Eight domestic and international pension funds, representing more than $300 billion in U.S. public equity, are asking SEC Chairman Christopher Cox not to act, especially given that the agency is operating with four commissioners instead of five.

One of the Democratic commissioners left for a law firm in September, the other Democrat on the panel has announced her resignation but has not set a departure date.

“We are dead serious in opposing this action,” Fred Buenrostro, chief executive of the California Public Employees’ Retirement System told a conference call with reporters. Calpers is the largest U.S. pension fund with $252 billion assets under management.

The SEC is expected to proceed with a proposal this year to clarify its proxy rules after a 2006 federal court decision questioned the agency’s interpretation of them.

Proxy statements are sent to shareholders ahead of annual meetings telling them about nominations for director seats, executive pay levels and other information.

Calpers and other funds such as the California State Teachers’ Retirement System (CalSTRS) and five New York City pension funds sent terse letters to Cox on Monday, but stopped short of threatening the agency with lawsuits.

“You are about to preside over the largest setback to shareholder rights in over three decades,” Calpers said in its letter. CalSTRS said; “Why waste the resources of the market and the agency by enacting this unsatisfactory measure.”

The Colorado Public Employees’ Retirement Association said: “We respectfully suggest to you that the contemplated action will dramatically disenfranchise the world community of investors.”

Earlier this year, the commission voted along party lines to float two competing proposals, with Cox as the swing vote. One proposal would override the 2006 court decision and return the SEC to its practice of routinely allowing companies to exclude shareholder proposals over director nominations.

The other proposal gives shareholders meeting certain requirements a way to propose amending company bylaws to allow them to nominate corporate directors on the proxy statement.

However, investor advocates have derided both proposals, saying they bar access without providing shareholders with any meaningful alternative approach.

On the conference call with reporters, the pension funds would not say what type of action they would take if the SEC adopted a rule they feel fails to give shareholders a meaningful way to access a corporate proxy.

But the American Federation of State, County and Municipal Employees (AFSCME) union, which won the 2006 court ruling over proxy access, said separately it would not shy away from legal action to protect shareholder rights for proxy access.

“When the appropriate time comes for a legal response we expect that other major institutional investors will join us,” Rich Ferlauto, AFSCME’s director of pension and benefit policy, told Reuters.

The pension funds did not say whether they planned to put forth proposals to nominate corporate directors this proxy season. (Editing by Tim Dobbyn)