SEC Said Close To Compromise On Shareholder Access Issue

by Glen Shapiro, LawAndTax-News.com, New York

13 August 2004

Almost a year ago, Securities and Exchange Commission Chairman William Donaldson told Congress that the agency would consider allowing shareholders to nominate some company directors using the corporate proxy statement, a pamphlet distributed to shareholders annually.

Resistance to this proposal from business interests and two Republican commissioners, Paul Atkins and Cynthia Glassman, has forced Mr Donaldson to spend months trying to broker a compromise that would satisfy both sides of the debate.

It now appears that compromise is near at hand on a proposal that would allow shareholders to sit down with a company's management and discuss a replacement for a director who has been targeted by investors for removal. If an agreement couldn't be reached, shareholders would have the right to make their own nomination.

It's unclear whether the proposal would gain support from Commissioners Atkins and Glassman, or from business interests, and there are some obvious difficulties of definition. What would constitute 'targeting', for instance? It seems all too easy for a small group of activist shareholders with special interests to usurp the interests of the majority - and once a name is on the nomination papers, it tends to get nodded through. On the other hand, no-one can deny that there is a 'democratic deficit' for shareholders in the current set-up. This is an argument that will run and run!

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