NRLN Praises SEC Ruling Giving Small Shareholders Right
To Propose Nomination Of Directors Through Proxy Process
Historic Precedent Set To Make
Corporate Governance More Open
(WASHINGTON, March 9, 2004)Retiree organizations are applauding a ruling by the Securities and Exchange Commission allowing small shareholders to propose the nomination of board of director candidates through the proxy process.
The SEC ruling came in a decision rejecting Qwest Communications request to exclude shareholder proposals on director independence and on competing director candidates.
This is a historic precedent by the SEC, since shareholders at Qwest will be the first allowed to vote on whether stockholders should have access to the proxy to nominate independent directors in competition with incumbent directors, said Jim Norby, president of the National Retirees Legislative Network (NRLN). The decision is a clear sign the SEC intends to finalize the reform it proposed last October, allowing groups of shareholders direct access to the proxy to nominate candidates for the board.
Norby explained that although only a direct access proposal put forward by shareholders owning over 1% would be binding, small shareholders will at least be allowed to register shareholder opinion by submitting a precatory (advisory) resolution.
In October 2003, the SEC proposed new Rule 14a-11, under which companies may have to include in their proxy materials a limited number of director candidates nominated by shareowners. The rationale, according to the SEC, is that shareholders who are dissatisfied with the leadership of a company generally must undertake a proxy contest, along with its enormous expense, to put nominees before the shareholders for a vote. On the other hand, a board's nominees are funded out of corporate assets.
Three Qwest shareholders from Arizona, who are members of the Association of US West Retirees (AUSWR) had submitted a proxy proposal for the May 25 Qwest Annual Meeting arguing that Qwests board lacks independence and that competition is needed in the election of directors.
"We are extremely pleased with the SEC decision," said Nelson Phelps, executive director of AUSWR, a NRLN affiliate member. "This decision further strengthens our belief that corporate governance reform is critical to shareowner interest."
This is yet another example where retirees are exercising their clout as shareholders to bring about greater accountability by a corporation, said Ken Raschke, president of the Lucent Retirees Organization, another NRLN affiliate member. The SEC is to be commended on its efforts to make corporations more accountable to its owners.
An LRO-sponsored proxy to limit golden parachute payments received 65% of the votes cast by shareholders at the Lucent Annual Meeting on February 18.
This SEC action will certainly get the attention of the corporate governance community, Norby predicted.
Based in Washington, D.C., NRLN represents nearly two million retirees from Association of US WEST Retirees, Association of BellTel Retirees, Prudential Retirees, Monsanto Retirees, Raytheon Retirees, along with groups from Boeing, GE, GM, IBM, Johns Manville, Lucent Retirees, Portland Electric (Enron), SNET, Western Union and others. .
For More Information Contact:
National Retiree Legislative