September 12, 2003
Mr. Patrick A. Jorstad
Mr. Jonathan G. Katz
Re: File S7-14-03 (Proposed Rule Regarding Director Nominations and Communications)
Dear Mr. Katz:
I am writing with regard to the proposed rule referenced above. I appreciate the chance to comment on this matter. Throughout this letter, I make reference to the comment letter that the Commission received from Mr. David A. Smith, dated September 3, 2003, which is archived on my website1 Last week, I received a courtesy copy of Mr. Smith's comment letter, which seems to have caused something of a stir in both reformist and corporatist circles. Mr. Smith's letter is referenced at CorpGov.net2("one of the more interesting comment letters"), CorpLawBlog.com3("an eloquent argument"), and TheCorporateCounsel.net Blog4("provacative" [sic]).
In 1999, I submitted a Rule 14a-8 proposal to State Street Corporation (NYSE: STT) for consideration at the 2000 Annual Meeting5 Long before Enron imploded, my proposal sought to improve corporate governance practices at the company. The Corporation sought to exclude this proposal from its proxy materials6 After the SEC considered both sides' position statements and rebuttals7 it issued a no-action letter that declined to concur with the Corporation's position8
I attended the 2000 Annual Meeting in person, in order to present my proposal, as required by 17 CFR §240.14a-8(h), which states: "Either you, or your representative who is qualified under state law to present the proposal on your behalf, must attend the meeting to present the proposal." To comply with the SEC's rule, I took time off from work to attend the meeting, incurred travel and lodging expenses, and prepared a brief statement in support of my proposal, but I was not allowed to address those in attendance at the meeting. While his corporate lawyers at Ropes & Gray looked on, the Chairman and CEO of State Street, Mr. Marshall N. Carter, refused to yield the floor to me to present my proposal.
Five other proposals were submitted to the Corporation for consideration at the 2000 Annual Meeting9 pursuant to Article I, §7 of the Corporation's By-laws10 Among these five other proposals were two seeking to enact mandatory amendments to the By-laws11 Shareholder action to amend the By-laws is proper under the Massachusetts General Laws, Chapter 156B, §§17, 41, and 54, and under Article VI ("Amendments") of the Corporation's By-laws:
These five other proposals were briefly referenced in the "Other Matters" section of the Corporation's 2000 Proxy Statement, but were not included in the form of proxy12 Thus, with no checkboxes to indicate our votes on the form of proxy, the Corporation's other shareholders and I were effectively disenfranchised with respect to these five proposals. Not only were the shareholders effectively dispossessed of our inherent property rights to vote by proxy on these five matters, but - with respect to the two proposed mandatory By-law amendments - we were also effectively dispossessed of our inherent property rights to make, amend, or repeal By-laws. Southgate & Glazer, Massachusetts Corporation Law and Practice, a treatise authored by more than forty Ropes & Gray attorneys, appears to support my point at §7.10:
The shareholders' disenfranchisement becomes clear when looking at the Form 10-Q that State Street filed on May 15, 200013 Under the section heading "Submission of Matters to a Vote of Security Holders", the Corporation reports an unnaturally lopsided vote on these five matters. Zero votes are reported in favor of any of these five matters, which is obviously a direct result of their omission from the form of proxy14
As Mr. Smith described in his letter, at the 2000 Annual Meeting the Chairman, Mr. Carter, barred him from speaking in favor of these five proposals, including the proposal to end the self-dealing relationship with Ropes & Gray15 Also at that meeting, the Corporation distributed unprecedented new Meeting Guidelines16 Mr. Carter selectively enforced these Guidelines with respect to Mr. Smith and me. No such Guidelines were distributed at either the 1998 or 1999 Annual Meetings, which I also attended17 When another shareholder, Mr. Todd M. Wesche, challenged the fairness of the Chairman's refusal to let Mr. Smith speak at the 2000 Annual Meeting, Mr. Carter fumbled his response badly, to put it charitably.
The 2000 Annual Meeting was videotaped. State Street's attorneys have repeatedly refused my demands to inspect the videotape, which serves as a record of the Chairman's inequitable conduct, and of the Directors' inaction when their Chairman refused to yield the floor to either Mr. Smith or me. Mr. Carter unexpectedly resigned one month after his actions at the meeting18 I urge the SEC to subpoena the videotape. I also urge the members of Congress and state regulators who receive a copy of this letter to subpoena the videotape. As I see it, reasonable fact finders would be justified in drawing the inference that the Corporation's refusal to produce the videotape for inspection amounts to an admission of wrongdoing (on the parts of the Corporation, Mr. Carter, and the Directors then in office).
The same week that Mr. Carter unexpectedly resigned, Mr. William L. Patton, Esquire, a partner at Ropes & Gray, contacted Mr. Smith and me to propose settlement discussions arising, in part, out of Mr. Carter's conduct at the 2000 Annual Meeting. Leading up to these discussions, Mr. Patton requested that both Mr. Smith and I refrain from filing suit against his client, State Street Corporation, or any executives, directors, or officers thereof. Leading up to - and during - these discussions, Mr. Patton repeatedly stated that if terms could be reached, his client was willing to "pay a premium" for Mr. Smith's and my stock, and he spoke of mechanisms by which the Corporation could do so discreetly and quietly.19I attended these settlement talks, held in Washington, DC, in the hopes that some of my ideas for improving the Corporation's governance practices would be implemented. I went prepared with a written list of specific measures I would like to see the Board of Directors adopt. From my perspective, the talks broke down because neither the Corporation nor its self-dealing attorneys at Ropes & Gray were willing to concede that any changes were necessary where the company's corporate governance practices were concerned.
I re-submitted my Rule 14a-8 proposal for consideration at the 2001 Annual Meeting with minor modifications20 Drawing upon my observations of the outrageous conduct at the 2000 Annual Meeting, I also co-sponsored a proposal, pursuant to Article I, §7 and Article VI of the Corporation's By-laws, seeking to enact a mandatory By-law amendment that incorporated shareholder-friendly rules for conducting the Corporation's shareholder meetings21 CalPERS supported both proposals22 and both proposals performed respectably, in my opinion23
At the 2001 Annual Meeting (and since), the new Chairman and CEO, Mr. David A. Spina, employed a slightly more genteel set of tactics to control debate than his predecessor, Mr. Carter. Although permitting Mr. Smith and me to speak at these meetings, Mr. Spina has placed us under a two-minute clock, and has abruptly cut off discussion whenever uncomfortable questions or comments have been raised from the floor24
For consideration at the 2002 Annual Meeting, I submitted a different Rule 14a-8 proposal, seeking to repeal State Street's staggered board, and to permit shareholders to remove directors with or without cause25 I also co-sponsored a proposal, pursuant to Article I, §7 and Article VI of the Corporation's By-laws, seeking to enact a mandatory By-law amendment that addressed director independence and auditor independence at the Corporation26 Amalgamated Bank submitted a Rule 14a-8 proposal, seeking to redeem the Corporation's "poison pill"27
My Rule 14a-8 proposal to repeal State Street's staggered board debuted strongly, garnering 85,747,069 votes28 My co-sponsored proposal to enact a mandatory By-law amendment to address director and auditor independence debuted respectably, with 18,498,724 votes29 CalPERS supported both proposals30 Amalgamated Bank, well known for its corporate governance activism on behalf of America's labor unions, saw its proposal to redeem the poison pill pass with 124,585,393 votes 31 The Board of Directors refused to implement Amalgamated's proposal; instead, they explained away their decision not to act in accordance with the shareholders' majority vote in a letter to the Council of Institutional Investors32
For the 2003 Annual Meeting, I re-submitted my Rule 14a-8 proposal to de-classify State Street's Board of Directors, and to permit shareholders to remove directors with or without cause, with minor modifications33 Pursuant to Article I, §7 and Article VI of the Corporation's By-laws, I also re-submitted the proposal to enact a mandatory By-law amendment to address director and auditor independence34 with a slight relaxation of the look-back period on director interlocks (in response to feedback I received regarding the proposal in 2002).
My Rule 14a-8 proposal to repeal the staggered board did even better in 2003 than 2002, garnering 108,121,108 votes35 Propelled by higher voter turnout and fewer abstentions, the proposal enjoyed a 26% surge of support, while the Board of Directors saw a 7.5% decay in support for its position36 I intend to re-submit this proposal for consideration at the 2004 Annual Meeting, with slight modifications to the supporting statement. For a list of respected institutional investors known to have supported this proposal in 2002 and/or 2003, please see http://www.shareholdersonline.org/pdf/InstitutionalSupportRevision2.pdf.
In 2003, State Street excluded the proposed mandatory By-law amendment regarding director and auditor independence from its form of proxy. As a result, this proposed mandatory By-law amendment, which institutions like CalPERS supported in 2002, only garnered 170 votes in 200337(cf. 18,498,724 votes in 2002). The SEC is urged to pay particular attention to this matter, for the following reasons:
First, the 170 votes shown voted "for" this mandatory By-law amendment are those of my two co-sponsors, who voted in person or through a personal representative at the 2003 Annual Meeting. In order to give effect to his vote "for" our proposed amendment, each had to obtain a paper ballot at the meeting. No other means of voting "for" the amendment was afforded.
Second, I was barred from obtaining such a paper ballot at the meeting. The 219 shares that I owned, as of the 2003 record date, were all held through the Corporation's Salary Savings Program ("SSP")38 State Street Bank & Trust Company, as Trustee for the SSP, voted my shares against my own co-sponsored proposal. The voting instruction form I received from the Trustee prior to the meeting: (1) specifically barred me from providing my voting instruction at the meeting itself; and (2) provided no checkboxes for me to give my advance directive on how to vote my shares with respect to the proposed mandatory By-law amendment. As such, it is my view that the Trustee's voting instruction form is a contract of adhesion.
Furthermore, I fail to see how this does not constitute the tort of conversion of private property and/or larceny. It is a well-established principle of law that the voting rights of shares, as inherent property rights of those shares, are "assets"39 I am the beneficial owner of the underlying shares. At any point in time, I have the right to demand that the Corporation tender to me the shares allocated to my account. Why then, are my inherent property rights to: (1) vote in person or by proxy; and (2) to vote on proposed By-law amendments, usurped? Why then, are these same inherent property rights usurped where other shareholders are concerned?
The Corporation's management and its attorneys seem to be gambling on the prospect that Rule 14a-4 ("Requirements as to Proxy") excuses the exclusion of proposed mandatory by-law amendments from the form of proxy, applicable state law notwithstanding (see Massachusetts General Laws, Chapter 156B, §§17, 41, and 54). I urge the SEC to amend Rule 14a-4 to include an instruction that registrants may not rely upon its exemptions to omit matters - such as proposed mandatory by-law amendments or shareholder-initiated director nominations - that are proper to consider at shareholders' meetings under the registrant's by-laws and/or state law.
Since 1999, I have sought the Corporation's stockholder list information in the hopes of conducting timely, cost-effective solicitations in favor of my proposals, and in the hopes of communicating with other shareholders about matters of mutual concern regarding the Corporation's management. Since then, the Corporation - acting through its internal legal department and through its attorneys at Ropes & Gray - has deployed every defense mechanism imaginable to thwart my attempts to obtain these lists. Battle by battle, year by year, the Corporation has slowly and grudgingly ceded ground, turned over more information, and repeatedly adopted new fallback positions. To date, however, the Corporation's Directors and attorneys still refuse to turn over the list of participants in the SSP, even though such participants can direct the voting of their shares with respect to my Rule 14a-8 proposal, even though the SSP accounts for millions of shares/votes40 and even though courts in multiple jurisdictions have ruled against registrants that have refused to produce such a list for an insurgent's use41
According to the Corporation's 2003 Proxy Statement: "Each member of State Street's Executive Committee, Executive Compensation Committee and Examining and Audit Committee is also a member of the corresponding committee of [State Street Bank & Trust Company, the Trustee of the SSP], and members customarily hold joint meetings of both committees." Mr. Truman S. Casner, Esquire, of Ropes & Gray, is thus jointly Chairman of the Executive Committees of both State Street Corporation and State Street Bank & Trust Company (the Trustee of the SSP). In light of these facts, I have no confidence whatsoever that the Trustee acts independently or impartially in deciding how to vote the proxies of the shares held by the SSP42 A review of the "Master Trust Agreement" between State Street Corporation and State Street Bank & Trust Company only deepens my misgivings on this point43
On March 11, 2002, Mr. Smith filed suit in the Massachusetts Supreme Judicial Court (the "SJC" is the state's highest court) seeking to obtain shareholder list data that the Corporation refused to obtain and provide. On March 19, 2002, the Corporation's directors and attorneys fell all over themselves, like Keystone Cops, to reverse course and to provide both of us with some, but not all, of the disputed shareholder list data44 Their attempt to moot out the legal issues came too late for either of us to make practical use of the data, since management had already begun distributing its proxy materials for the 2002 Annual Meeting on March 11, 200245
On March 14, 2002, the Massachusetts SJC transferred Mr. Smith's lawsuit to the Suffolk Superior Court in Boston. On March 21, 2002, Ropes & Gray filed an "Emergency Motion" to have the case transferred to the experimental Business Litigation Session ("BLS") of the Suffolk Superior Court. Obligingly, the Honorable Alan van Gestel46 presiding judge of the new BLS, granted Ropes & Gray's "Emergency Motion", and ordered the case transferred to his court.
On April 1, 2002, Ropes & Gray served a "Motion for More Definite Statement". Obligingly, Judge van Gestel scheduled the hearing on this motion for the afternoon after the 2002 Annual Meeting was set to take place (April 16, 2002), instead of rejecting the motion out of hand. Then, the day after the 2002 Annual Meeting and the motion hearing took place, Judge van Gestel issued an order denying the Corporation's motion47 Remarkably, Mr. Smith prevailed on the motion pro se48 His brief opposing the motion contained citations to: (1) a bar journal article authored by the judge himself; (2) an on-point SJC precedent that had been decided against the very Ropes & Gray attorney who filed the motion; and (3) caselaw from numerous jurisdictions that supported his rights to inspect and make use of the shareholder list data in question49
Had the Corporation not stonewalled my own requests for the shareholder list data until the last minute, and had I been able to undertake timely, cost-effective solicitation of other shareholders, I believe that my shareholder proposals would have fared even better than they did in 2002 and 2003. As it stands, I am proud that my proposals received significant support on their own merits50 even without supporting solicitation efforts, and in spite of the Directors' and attorneys' every defensive maneuver.
The picture that emerges, for me at least, is that those currently in control of State Street will stop at nothing to perpetuate their control, and they will stop at nothing to inhibit intra-corporate communication. Concerned about the ongoing self-dealing relationship with Ropes & Gray and other corporate governance issues at State Street, I have recently sought the shareholder list data again to attempt to call a special meeting of stockholders, pursuant to Article I, §2 of the Corporation's By-laws and Massachusetts General Laws Chapter 156B, §3451
One of Mr. Casner's colleagues at Ropes & Gray (indeed, the very same Ropes & Gray partner who filed the "Motion for More Definite Statement" as a delay tactic in Mr. Smith's lawsuit) responded to my latest request with a self-serving reply, refusing to provide the shareholder list data, and stating that my direct written communications with Board members to seek changes in corporate governance practices at State Street constitutes "harassment"52
The attorneys at Ropes & Gray are just protecting one of their own, as far I am concerned, and camouflaging their actions with the help of 17 CFR §229.404(b)(4). That they are able to defend one of their own, and charge the Corporation's shareholders undisclosed fees for doing so, adds insult to injury, from my perspective.
Little matter; through private investigation, I have recently obtained the contact information for about 1,000 of the largest State Street shareholders, and intend to communicate directly with them about my beliefs that State Street is being mismanaged by its Board of Directors. To a large degree, this approach will allow me to circumvent the shareholder list disputes of the past, and to take my information directly to my fellow owners (within the parameters of the proxy rules, where and as applicable, of course). When State Street's governance eventually improves, I hope to leverage the lessons learned, and to expand my website's scope to include other registrants53
The SEC's Proposed Rule
In The Federalist Papers, James Madison observed: "If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary."
He also wrote: "No man is allowed to be a judge in his own cause, because his interest would certainly bias his judgment, and, not improbably, corrupt his integrity. With equal, nay with greater reason, a body of men are unfit to be both judges and parties at the same time ... It is in vain to say that enlightened statesmen will be able to adjust these clashing interests, and render them all subservient to the public good. Enlightened statesmen will not always be at the helm. Nor, in many cases, can such an adjustment be made at all without taking into view indirect and remote considerations, which will rarely prevail over the immediate interest which one party may find in disregarding the rights of another or the good of the whole."
When Hamilton, Jay, and Madison penned The Federalist Papers' essays, they embraced pluralism, and they championed the system of checks and balances that became a pillar of American constitutional principles. Recognizing that the weaker Articles of Confederation had failed to create a viable system of governance, the Founders went back to the drawing board, and the United States Constitution was the harvest of their handiwork.
I urge the Commission to seriously consider whether its current rulemaking more closely resembles the defunct Articles of Confederation or the robust United States Constitution. For my part, and from where I sit, the proposed rules look a little toothless and scrawny, and I think a trip back to the drawing board is in order for the SEC. Here are ten suggestions for a re-draft, designed to rebalance the current system of checks and balances more in favor of investors:
1. Have faith in investors; don't fear them. Investors are at least as smart as the general voting public. The current paternalistic system for choosing directors is condescending, and it insults investors' intelligence. Giving shareholders access to the proxy materials to nominate their own candidates will not lead to the downfall of civilization or any of the other alarmist predictions that are emanating from corporate boardrooms and corporate law firms. Investors are capable of sorting out their own best interests, if given the opportunity to evaluate all sides of an issue or candidacy. Not all candidates or all ballot issues will be judged worthy by investors, but all candidates and all ballot issues should have equal opportunity to contend in the free marketplace of ideas. Today's "fringe" issue or candidate, allowed to compete and communicate, may become tomorrow's norm. Just imagine the state of our nation today if the "fringe" issues of yesteryear - e.g., women's suffrage or civil rights - had not been allowed to fight to gain acceptance.
2. Revise Rule 14a-4 ("Requirements as to Proxy"). Any matter that is a proper subject for shareholder action under the registrant's state law and/or by-laws belongs on the form of proxy - with checkboxes - to empower the registrant's shareholders to act on that item. It is inappropriate to allow the registrant's directors to exercise discretionary authority over such matters (e.g., mandatory amendments to the by-laws or articles of organization). In other words, management's form of proxy should not be permitted to be a contract of adhesion. Indeed, to the extent that this federal regulation robs shareholders of a property right accorded to them under state law and/or common law (voting rights are inherent property rights), it may in fact raise eminent domain issues. Rule 14a-4 should be revised to make clear that registrants cannot rely upon its terms to avoid putting matters that are proper under state law on the form of proxy, with checkboxes provided. This rule should also advise registrants that voting rights are property rights, and that improper use of Rule 14a-4's exemptions may create claims in tort and/or constitute criminal conduct under state law.
3. Revise Rule 14a-7 ("Obligations of Registrants to Provide a List of, or Mail Soliciting Material to, Security Holders"). Almost invariably, registrants elect to mail an insurgent's materials, rather than obtain and turn over the shareholder list data referenced in this rule. This increases the insurgent's solicitation costs, often prohibitively so. To balance Rule 14a-7 more fairly, I suggest that the SEC revise it to require every registrant that has reported a vote surpassing the thresholds set forth under Rule 14a-8(i)(12), ("Resubmissions"), to: (1) obtain the shareholder list data referenced in Rule 14a-7; and (2) make this data available to any proponent whose Rule 14a-8 proposal attained the requisite number of votes. My reasoning is that any proponent who has attained the voting thresholds set forth under Rule 14a-8(i)(12) has demonstrated a minimum level of seriousness that warrants access to this shareholder list data (i.e., "non-objecting beneficial owner lists/NOBO lists" or "consenting beneficial owner lists/COBO lists"). I also argue that the body of shareholders, as a whole, benefits from the activities of serious insurgents, and it is therefore appropriate for the registrant, as the representation of that body of shareholders, to bear the cost of obtaining the list information from ADP under these circumstances. I also urge the Commission to add a clear instruction to Rule 14a-7, stating that compliance with its terms does not obviate the registrant's duty to also comply with applicable state laws governing a shareholder's rights to inspect and make use of shareholder lists.
4. Revise Rule 14a-8 ("Shareholder Proposals"). If the Commission is serious about giving shareholders access to registrants' proxy materials to advance their own director nominees, then it is time to repeal Rule 14a-8(i)(8). As I see it, as long as shareholders are banned from using the shareholder proposal process to place nominees on the registrant's proxy materials, the SEC is tinkering with its own version of the Articles of Confederation.
5. If the SEC will not repeal Rule 14a-8(i)(8), then revise Item 7(d)(2)(ii)(L). My strong preference is for the SEC to repeal Rule 14a-8(i)(8). Otherwise, I urge the Commission to revise Item 7(d)(2)(ii)(L) to also require a registrant to disclose when it has rejected a director nominee from any proponent whose proposal has received a simple majority of the "yes-no vote" at the prior shareholders' meeting (excluding abstentions and "broker non-votes" from the calculation). My reasoning is that any insurgent whose proposal has received a simple majority of the "yes-no vote" has demonstrated a level of commitment, seriousness, and broad-based support that warrants the right to the proposed benefits of (ii)(L). I also believe that shareholders have a right to know if a registrant has rejected candidates from such a serious insurgent.
6. Publicly announce that the SEC will be sending staff attorneys to registrants' meetings, in tandem with state regulators. If the Commission and its staff wants to engage in real reform that has value and meaning in the real world, use the next annual meeting season as an opportunity to get out there and observe, firsthand, the tactics that are being employed to squelch shareholders54 Don't give any prior hint as to which registrants' meetings will be visited. Announce that staff attorneys who attend registrants' annual meetings will be empowered to recommend appropriate enforcement action in those instances in which registrants violate state or federal laws or regulations, especially Rule 14a-9 ("False or Misleading Statements"). Make this a cooperative state-federal initiative with regulators such as New York Attorney General Eliot Spitzer. Watch the number of post-meeting complaints from insurgents go down after the next meeting cycle, as corporate CEOs all across the land put their very best foot forward.
7. Give "shareholders' meetings" back to the shareholders. Annual shareholders' meetings are the one guaranteed opportunity that the owners of a company have to hold management to account. These meetings should not be scripted shams or choreographed charades55 They are called shareholders' meetings - not management's meetings - for a reason. It is unacceptable that supposedly "independent" directors sit idly by when CEOs muzzle insurgents at these meetings. "Principles of equity and fairness serve as the standards by which the actions of those presiding over the meeting are judged.56 This treatise quotes Chancellor William T. Allen of the Delaware Chancery Court: "We assume that at such [shareholders'] meetings something said may matter." The treatise continues: "Indeed, the Delaware Supreme Court indicated that a stockholder's inability to ask questions might give rise to a claim of `disenfranchisement'.57 Allowing real shareholder input into the nomination process will breathe new life into the concept of "shareholders' meetings", in my opinion. To that end, I urge the SEC to: (1) repeal Rule 14a-8(i)(8) - see suggestion #4 above; (2) revise Rule 14a-8 to grant proponents a minimum of five minutes' time to speak from the podium in favor of their proposals and/or candidates ("something said may matter"); and (3) add new regulatory language to create a formal SEC process for investors to complain about inequitable or oppressive conduct at registrants' shareholder meetings (e.g., preventing shareholders from asking salient questions).
8. End the SEC's special treatment of the corporate bar. I concur with Mr. Smith's letter on this topic. Regulations such as 17 CFR §229.404(b)(4) and 17 CFR §205 do nothing to restore investor confidence in the markets, and they invite investor cynicism. It is time for the Commission to get tough with the corporate law firms and corporate lawyers that appear before it. These law firms are supposed to work for the owners of the company (i.e., the shareholders), not management. When a corporate attorney is permitted to serve as a director of a registrant that his law firm represents, it does not take a James Madison to see that "his interest would certainly bias his judgment, and, not improbably, corrupt his integrity."
9. Exclude "broker non-votes", and base regulatory thresholds on simple "yes-no" voting. I applaud the recent steps taken by the SEC and the self-regulatory organizations to prohibit broker non-votes on equity compensation plans. I urge the SEC to prohibit registrants from counting such broker non-votes - which often have the same effect as a "no" vote when deciding the outcome of shareholder proposals - for any purpose, including director elections. In a democratic society, we do not give the effect of a "no" vote to the registered voters who stay at home and don't bother going to the polls to vote on a ballot initiative. Nor do we award these "stay at home" votes to the incumbents then in office. Yet that is precisely what happens in corporate America, because the current regulatory system allows it. In America, the voters who bother going to the polls are the ones who decide the issues and elect the officials, and "no shows" don't count on Election Day. This bedrock American concept should apply at American corporations. If the SEC recognizes that broker non-votes are a bad idea for approving equity compensation plans, it follows that they're a bad idea for deciding other corporate issues as well. Besides ending broker non-votes, I urge the SEC to base its own regulatory thresholds - e.g., Rule 14a-8(i)(12) - on simple "yes-no" voting.
10. Concede that the regulatory system has a hand in the current state of affairs. Today's regulatory system is the product of incremental "mission creep" over time, in my opinion. William O. Douglas, an early SEC Chairman and later a Supreme Court Justice, coined the SEC's motto: "We are the investor's advocate." It is easy to wonder where our advocate has been, looking at the regulatory barriers to shareholder action that have been enacted over the years - at the behest of the corporate bar. Lately though, I read something almost every day that leads me to believe that the SEC has newly reawakened to its duties to investors, and is approaching these duties with renewed vigor. Scrapping the anti-investor, pro-corporate Articles of Confederation that pass for rulemaking these days would be a good start58
I appreciated many of the remarks that Chairman Donaldson made in his speech to the Senate Committee on Banking, Housing and Urban Affairs on September 9, 200359 and I look forward to reviewing and commenting upon the SEC's forthcoming proposed rules on shareholder access to the proxy materials later this fall. In the meanwhile, I am and remain