Again this is only to NOMINATE someone - they still have to WIN on their own.
To refresh, from June:
- This issue predates the financial crisis; in fact it harkens to the scandals of the 1920s. The problem is that shareholders have no effective way to hold directors accountable. Proxy contests are all but rigged, because incumbent directors use corporate funds to solicit votes; dissidents must spend their own dough. Typically, incumbents capture 99 percent of the votes. Not even Hugo Chavez polls that high , and it is no wonder that boards are so apt to ignore shareholder concerns.
- Since the 1990s, reformers have realized that the key to genuine democracy is to grant legitimate non-management candidates access to the company ballot (the proxy card that the board distributes and that all shareholders pay for). The Securities and Exchange Commission has proposed a rule that would allow nominations from minority shareholders that owned a reasonable minimum of shares. Of course, nominees would still have to win elections to join the board.
- Even that dollop of democracy is too much for the Business Roundtable, the lobbying group for chief executives. The Roundtable has been lobbying against proxy access since the idea surfaced. Also, foes of shareholder access have threatened to take the SEC to court if the agency dared to let the owners of a business actually nominate directors.
So at that point, Senator Dodd with White House backing according to the story, were on the side of the Business Roundtable (of course per CNBC the White House hates business)
So the threat of lawsuit if this indeed happened loomed back in mid summer.
What happened last week? Boo yah Cramerica.
- The U.S. Chamber of Commerce, the nation’s biggest business lobby, and the Business Roundtable sued the Securities and Exchange Commission to overturn a rule that makes it easier for investors to oust corporate directors. The rule, which allows shareholders owning 3 percent of a company to nominate board members on corporate ballots, was passed by a divided SEC last month.
- The chamber and Washington-based Business Roundtable, which represents chief executive officers of the biggest U.S. companies, have retained Gibson Dunn & Crutcher LLP lawyersEugene Scalia and Amy Goodman to handle the case.
- The U.S. Chamber of Commerce and Business Roundtable called the rule "arbitrary and capricious"
Please keep in mind this could not even be used to oust a majority of board members, simply to get some face time on these crony boards. Even that little amount is TOO MUCH for the vested interests.
- Under the regulation, shareholders would be able to nominate at least one director and as much as 25 percent of a board. Investors couldn’t use the rule if their intent is to oust a majority of board members and take over a company.
Here is where it gets rich... the lobbying group for big business & their CEOs - the U.S. Chamber of Commerce - (even small businesses think this lobbying group works against them per various stories I have read) say this protects THEM from special interests. Haha - you can't make this stuff up. Of course a group of elite executives who scratch each others backs by nominating each other for each others boards, in a closed system of cronyism is NOT a special interest mind you.
- “These rules are wholly unnecessary,” said David Hirschmann, president of the chamber’s Center for Capital Markets Competitiveness. “This special interest-driven rule will give small groups of special-interest activist investors significant leverage over a business’ activities.”
Pssst. Mr Hirschmann.. say something about saving American jobs (which US multinationals are doing a heck of a job of the past 2 decades), and wave a flag while you say it.
- "This will undermine a company's ability to grow and create jobs."
- The chamber has said that labor unions and public pension funds would hijack companies and push political agendas if given more power to nominate directors.
Holy smoke - we should only hope public pension funds were more involved as shareholders and actually acted like owners who cared about their long term interests. Just imagine the savings to the taxpayer in the financial sector alone. As it is now, only a small group of elite wealthy can even ATTEMPT to make successful nominations and even if with all their resources they often fail.
- Before the SEC approved its rule, shareholders could nominate dissident directors only by mailing a separate ballot and persuading other investors to vote with them. Activist investors such as Carl Icahn and Nelson Peltz have waged proxy fights to get their candidates elected to boards of companies they said were underperforming.
- Institutional investors vowed to fight the lawsuit and called it an assault on a fundamental shareholder right. "Proxy access will make companies more responsive to their shareowners and more vigilant in their oversight of companies. This basic right is widely accepted in many other countries and the Council will fight to preserve it here."
Apparently this has been tried in the past and fought off by "businesses who only care about jobs" and hence why it was included in footnote # 214,181 in the financial reform bill.
- In the past decade, two other SEC chairmen have tried to adopt proxy access rules with no success. This time, the SEC had backing from the Dodd-Frank financial reform bill, which affirms the agency's authority to adopt proxy access rules. The legislation is expected to help shield the SEC from some legal challenges, but it is not clear if that will be enough to withstand the lawsuit filed on Wednesday.
That was last week... this week? Boom. The move is now "halted".
- The government said Monday it is putting on hold new rules that make it easier for shareholders to nominate directors of public companies, after the U.S. Chamber of Commerce sued to block the changes. The changes were long sought by investor advocates.
- The debate over the rules comes as investors are angry about risks some corporations are taking for short-term profit gains and extravagant compensation packages for executives. The SEC voted 3-2 in August to adopt the new rules, with the panel's two Republican commissioners voting no.
Apparently the lawyer hired by the lobbyists firms is 3 for 3 against the SEC by finding procedural mistakes ... doesn't look good for the shareholders.
- Scalia is three-for-three in winning suits against the SEC..... on the grounds that the agency made procedural missteps in writing regulations.
- The proxy rule will be challenged on similar grounds that the SEC didn’t adhere to federal laws that dictate how agencies must consider and approve regulations, Scalia said at the news conference.
Anyhow, business as usual in a socialistic country. Except our socialism is of the corporate kind. Shows again why it does not pay to even have a glimmer of hope of things going to the right direction. I hate when I take the wrong colored pill, and will now reattach myself to the Matrix, and clap in seal like fashion at the miracle of the market that can only go up. Everything else is just details.
(for those still detached from the Matrix, a great opinion piece on how this " capricious" rule that will let the "unions take over" and "kill American jobs" is just a small step, and in current form not even that much of a change, in helping owners have a say in how a company is run.)
- "Market forces will operate far more efficiently if board members are subjected to even the very small market test of a very limited ability for shareholders to put alternate candidates to a vote," she wrote last month after the SEC adopted its rule. "The complaints of those who see specters of 'special interests' are hypocritical and disingenuous. No one will be elected to the board without the support of more than 50% of the shareholders."
Remember, we are all about free markets as long as it does not impact our own interest. Then those who decry socialism, ask that they be protected from free markets.
/this has been a huge pet peeve of mine for 15+ years.