December 22, 2003

VIA E-Mail

Mr. Jonathan G. Katz
Securities and Exchange Commission
450 Fifth Street, NW

Washington, DC 20549-0609

Re: Proposed Rules on Security Holder Director Nominations, 68 Federal Register 60784, SEC File No. S7-19-03

Dear Mr. Katz:

We are responding to the request for public comment regarding the rules proposed by the Division of Corporation Finance on October 23, 2003, to formulate changes in the proxy rules and regulations regarding procedures for the election of corporate directors. We believe that such a sweeping change requires a thorough examination of the reasons that certain stakeholders seek access to the director nomination process. Our comments provide information useful in understanding why the interests of these stakeholders and shareholders generally are not necessarily aligned. In short, we believe that this proposal, however well intentioned, is misguided and will likely have the opposite of its intended effect. The proposal will undermine director independence to the detriment of shareholders generally.

HR Policy Association is a public policy advocacy organization representing senior human resource executives of more than 200 leading employers doing business in the United States. The association provides in-depth information, analysis, and opinion regarding current situations and emerging trends in employment policy among its member companies, policy makers, and the general public. Collectively, HR Policy Association members employ over 19 million people worldwide and over 12 percent of the U.S. private sector workforce. Almost all of our member companies are publicly held.


HR Policy Association opposes the adoption of the rules proposed by the Commission. We believe in a model of corporate governance that has shareholders and managers working cooperatively towards the corporation's business success. The proposed rules, however, have the potential to be used by interests such as labor unions to pursue parochial agendas that conflict with the best interests of shareholders generally in terms of promoting the business success of the corporation. By creating a mechanism to permit special interests to elect a director captive to a specific constituency, the proposal actually undermines the recent trend toward electing a greater number of truly independent directors.

Said another way, we believe that the Commission, instead of promoting policies to ensure independent directors, is proposing a new form of directors-constituent directors, that is, directors beholden to constituent groups. Directors elected to boards by special interest organizations cannot be expected to act independently of those organizations, even if they are "independent" as defined by the Commission's proposed rules. Once on the board, these individuals could paralyze decision making until private agendas were met, thus taking the focus away from managing the corporation in the best interests of all shareholders. Having conflicts between those directors acting to further the corporation's business success and those acting to further the private agendas of the organizations that elected them to the board is not sound corporate governance.

The Proposed Rules Will Be Used to Pressure Corporations Into Adopting Social Positions That Conflict With Shareholders' Best Interests

Over the past twenty years, labor unions, environmentalists, and human rights advocates have developed a new method of pressuring large institutions, particularly publicly held corporations, into complying with their demands for changes in corporate practices. According to Professor Jarol Manheim, who has documented these strategies in Death of a Thousand Cuts: Corporate Campaigns and the Attack on the Corporation, such "corporate campaigns" are an organized assault involving economic, political, legal and psychological warfare against a company. The principal objective is to destabilize a large institution by disrupting key relationships with major stakeholders, which include shareholders, bankers, financial institutions and the Street.1 "Today," according to Thomas Greven and John Russo in their paper, Transnational "Corporate Campaigns": A Tool for Labour Unions in the Global Economy, corporate campaigns have become "a mainstream strategy of the U.S. labour movement."2

Within the last five years, one of the most frequently used weapons in corporate campaigns is manipulation of shareholder relationships and the proxy process by labor unions and others as a tool to achieve their objectives. As explained by Professor Manheim:

Among the primary targets of the finance dimension of the corporate campaign are the target company's investment and commercial bankers (often including insurance companies, which are major lenders), its individual and institutional shareholders, and the financial and industry analysts who most closely follow its fortunes.3

Marleen O'Connor, a Stetson University law professor, associate director of the International Institute for Corporate Governance and Accountability, and self-described "progressive scholar," sheds further light on this practice in "Employees and Corporate Governance: Labor's Role in the American Corporate Governance Structure." She writes that in some cases:

Unions seek to use shareholder activism at companies where they are concurrently engaged in contract negotiations or union organizing campaigns. By focusing on certain "wedge" issues that public funds support, unions can gain access to "behind the scenes" meetings with managers.... During these meetings, it is commonly understood among those in the institutional investor community that unions may discuss labor issues, as well as corporate governance matters. If these negotiations proceed favorably, the notion is that the union will withdraw its shareholder proposals.4

Professor O'Connor goes on to describe how at one company this tactic was used to remove a CEO and convince it to accept unionization at one of its facilities, while at another it was used to persuade the company to accept neutrality agreements (a commitment by the company to remain silent during a union organizing campaign).5

Law professors Stewart Schwab and Randall Thomas echoed Professor O'Connell's views on how unions are using their shareholder power anew in Realigning Corporate Governance: Shareholder Activism by Unions:

[U]nions use their shareholder power simply as a new weapon to further unions' traditional organizing and collective-bargaining goals. Some of the shareholder activism certainly occurs at companies at which unions are concurrently engaged in contract negotiations or union organizing campaigns.6

Similarly, an article entitled "Union Pension Power: Labor Is Mobilizing Its Investment Power to Pressure Corporate America," by David Moberg in The Nation, which was written when organized labor first started using pension power, leaves little doubt that the purpose of this strategy is to bolster labor's sagging ranks by attacking employers: "[S]trategies that rely on union pension power and on other ways of influencing management's access to capital provide new arrows for the union quiver and open a new terrain of battle."7

The conclusions reached in the commentary described above are wholly consistent with the corporate campaign pressures that many members of our association routinely experience. For that reason, HR Policy Association believes that the SEC's proposed rules will result in yet another weapon in the corporate campaign arsenal. Because the organizations that avail themselves of such weapons often have objectives that differ significantly from the shareholder population at large, it is likely that promulgating the proposed regulations will cause harm to shareholders generally.

The Purpose of the Board Is Managing in the Interests of All Shareholders

In analyzing the Commission's proposal, it is crucial to keep in mind how a corporation's board of directors works on behalf of, and interacts with, shareholders. "Generally, the board of directors has the sole responsibility to manage the business and affairs of a...corporation. This responsibility comes with the concomitant fiduciary obligation to protect the corporation and act in its, and its shareholders', best interest."8 The board is expected to manage the corporation with a fiduciary duty to all shareholders. This is especially important because individual shareholders, or sets of shareholders, may have competing views of corporate success. By definition, this requires that the board balance those differing interests.

According to Professor Edward Rock, in "The Logic and (Uncertain) Significance of Institutional Shareholder Activism," under traditional theories of corporate law, "shareholders' interest qua shareholders is to maximize the value of the corporation."9 However, it is clear that different shareholders have different perspectives on precisely what that value is. Some shareholders may have a short time horizon while others may have a longer one. Some may be risk averse while others may seek out risk in hope of a large return. Some may seek to promote social change through internal or external policies adopted by the corporation. Other shareholders may seek a combination of these or other objectives.

The board seeks to maximize the value of the corporation, not for individual shareholders, but for shareholders generally. Board decisions are based on an independent assessment of the interests and well-being of the company as a whole that are already attuned, more often than not, to the needs of communities, markets and employees. The role of balancing competing shareholder interests and sustaining corporate success rests with the board. Thus, the proxy process has traditionally been closed because companies themselves are best situated to match corporate needs and director qualifications. By opening the nominating process to shareholders, the Commission's proposal has the potential to upset the board's balancing function.

Shareholders have other options if they are dissatisfied with the job that the board is doing, namely, to divest their holdings and invest elsewhere. This is relatively easy for shareholders because public companies are highly transparent enterprises. Their successes or failures, and their policies, are easily knowable. Thus, the marketplace itself best ensures that the selection of corporate leaders and the direction of corporate policy reflect shareholder views without any need for further SEC regulation of the board election process.

It is true that occasionally regulation from some source may be required to correct a perceived inequity in the operations of boards that may affect the market, but that does not mean that radical changes, such as the proposed rule, are necessary to make such corrections. Rather, more incremental changes can produce similarly desirable results.

For example, in light of perceived abuses, before and after the accounting scandals of recent years, several restrictions have been implicitly or explicitly placed on the board nominating process to improve transparency and ensure that the board performs its balancing function appropriately. The first, mandated by the SEC, involved the creation of a separate nominating committee on the board.10 In addition, there has been a trend toward requiring a greater percentage-generally over 50 percent-of directors to be independent of management. More recently, the stock exchanges have proposed, and the Commission has approved, rules that require nominating committees to be composed entirely of independent directors to ensure that directors are chosen for their value rather than their relationships.11

The SEC's proposed rules would sweep far broader than any of these changes before gauging whether the reforms in progress have improved transparency or corporate governance, the very issues it seeks to address. The proposal would "create a mechanism for nominees of long-term security holders, or groups of long-term security holders, with significant holdings to be included in company proxy materials where there are indications that the proxy process has been ineffective or that security holders are dissatisfied with that process."12

Thus, the proposal would allow, for the first time, groups of similarly situated shareholders such as labor unions and public pension funds to manipulate the proxy process to gain one of their own in the board room. HR Policy Association believes that the process goes far beyond ensuring transparency in the director nominating process. Rather, it represents a fundamental shift away from board independence that will upset the board's ability to balance competing viewpoints in the best interest of all shareholders when making decisions.

Activist Investors Seek to Gain Leverage Against Corporations Through the Proxy Process

The Commission has indicated that its primary purpose in opening the proxy process to shareholders is to give shareholders a role in nominating directors to the board, in certain circumstances. However, the entities that most strongly back such a proposal may also be the ones with the greatest interest in using the process to further their parochial agendas.13

According to Professor O'Connor, "[t]he leading agents of the shareholder movement are public employee pensions funds and union pension funds."14 A recent Practising Law Institute summary of proxy activism, "Corporate Governance Activities of Institutional Investors and Other Activists," states: "[I]n recent years labor unions have become proponents of shareholder proposals and have become involved in other activism to gain leverage in collective bargaining negotiations or for social policy reasons or both."15 Unions have pursued shareholder resolutions on everything from corporate governance and executive compensation to union organizing and international labor principles.16 As Professors Schwab and Thomas remark in "Shareholder Activism by Labor Unions" on the amount of control that unions exert over multi-employer pension funds: "Despite the balanced board membership, unions have tended to dominate these jointly managed funds. Indeed, it is `often...very difficult to distinguish between the pension fund and the union.'"17

Thus, the union agendas sweep far broader than merely looking out for their own investments or promoting good governance. As Professors Schwab and Thomas also note, "[t]he union shareholder seeks to benefit workers at the expense of other shareholders."18 How they have used their status as significant shareholders under the current regime demonstrates how they would use the proposed proxy process to create conflict with the interests of shareholders generally.

For example, Professors Schwab and Thomas review union corporate campaign activity against Albertson's in Arizona in 1997, in which the United Food and Commercial Workers Union used shareholder actions against not only the company, but also the companies run by certain outside directors.

In 1997, the UFCW targeting Albertson's, in addition to six companies that share directors with Albertson's. Preliminary proxy materials indicate that the UFCW's Phoenix Local is engaged in negotiations over a successor contract and is also attempting to unionize other Albertson's employees in Arizona. The company has refused the Local's request to be voluntarily recognized as the representative of its currently nonunion workers and has instead insisted on NLRB elections.19

The article in The Nation, "Union Pension Power: Labor Is Mobilizing Its Investment Power to Pressure Corporate America," describes this conflict even more plainly: "The interests of workers as workers and workers and owners, or pension fund beneficiaries, are not always identical.... If they're true to their labor movement values, union pension trustees are not going to see corporate policies in the same light as other shareholders."20

Likewise, public pension funds are often used to promote social change, especially when faced with "interest groups within the state that have interests unrelated to, or directly contrary to, the maximization of the value of the fund,"21 according to Professor Rock. Often, unions have representatives on the board of public pension funds, and in one of the largest funds, CalPERS, a former United Food and Commercial Workers vice president is now the president of the board.22

Significantly, it does not appear that there is any research demonstrating that the proposals advocated by the activists have led to better financial performance by firms.23

HR Policy Association is also concerned with the recent practice of unions, public pension funds, and other activists working in concert with proxy voter services to recommend voting strategies for large institutional investors that are principally intended to further private agendas. Because many fund managers rely on proxy analysis services, an endorsement from such a service leverages union and pension fund power immensely. This combination could be used to meet the criteria in the Commission's proposal and lead to a representative on the proxy whose interests may be directly opposite those of shareholders.

For example, one proxy service that analyzes over 20,000 proxy contests a year joined recently with the AFL-CIO and the Hotel Employees and Restaurant Employees Union to promote international labor standards at a worldwide hospitality company.24 The intent was to attempt to gain leverage organizing its workers. It can be expected that such alliances would become even more common if the Commission's proposal were to become final because the rewards of success-either putting a member on the board or obtaining greater negotiating leverage-would increase dramatically.

It is clear that labor unions and public pension funds are the main force pushing to open the proxy process to large shareholders. Sean Harrigan, the former union official, now President of the Board of Administration for the California Public Employees' Retirement System (CalPERS), recently called opening the proxy process "the crown jewel" of corporate governance reforms.25 On September 25, 2003, CalPERS joined with the California State Teachers' Retiree System, the American Federation of State, County and Municipal Employees, the Connecticut Retirement Plans and Trust Funds, and the New York State Common Retirement Fund to sponsor a full-page advertisement in The Wall Street Journal stating that "open access for shareholders is the next critical step in corporate reform."26

Thus, if the proxy nomination proposal were to move forward, the result would be identical to that described by Professors Schwab and Thomas with respect to shareholder proposals, "[u]nions that are frustrated with the more passive forms of shareholder activism, or with traditional labor organizing efforts...[would] have another avenue for gaining influence with companies."27

Access to Corporate Decision Making Has Always Been a Goal of the Activist Movement

Another indication that the investor-activists seek to use the proxy process to create corporate social change derives from the history of social activism itself, which has always decried corporate power. In the defining protocol of the Students for a Democratic Society, The Port Huron Statement, written by Tom Hayden and adopted in 1962, stated:

It is not possible to believe that true democracy can exist where a minority utterly controls enormous wealth and power.... We can no longer rely on competition of the many to assure that business enterprise is responsive to social needs.... Nor can we trust the corporate bureaucracy to be socially responsible or to develop a "corporate conscience" that is democratic.... We must consider changes in the rules of society by challenging the unchallenged politics of American corporations.

In 1980, Representative Benjamin Rosenthal (D-NY) introduced legislation popularly known as the Corporate Democracy Act. The Act was the first attempt to codify the perspective set forth in Port Huron, and incorporated many of the elements that characterize anticorporate activism today. Title I of the Act would have required that a majority of directors be independent, and that every company establish a Public Policy Committee, with a majority of its members drawn from the independent directors and with responsibility for "those public or political positions taken by the company that may have a significant impact on employees, consumers, suppliers, individual communities and the physical environment." Further, the Act would have granted shareholders the right to nominate directors-the issue under consideration here-and established cumulative voting to permit them to pool votes for the candidates so nominated. Title V of the Act would have provided fines of $10,000 per day for any individual who served as a director of more than two corporations.

The introduction of the Corporate Democracy Act was accompanied by an event known as "Big Business Day," sponsored by Ralph Nader's group, Public Citizen, and headed by Mr. Nader, the presidents of several labor unions, and Richard Barnet, director of the Institute for Policy Studies, among others. In the words of the event's organizer, Mark Green:

In hundreds of communities across the nation there will be teach-ins and debates, alternatives-to-big-business fairs, ..."trials" of corrupt companies, nominations for a "Corporate Hall of Shame," symbolic bread lines at banks that red-line communities, and a compilation of models of corporate social responsibility.

Beginning in 1989, the Center for the Study of Responsive Law, another Nader organization, advanced model legislation for adoption at the state level that incorporated these and other provisions of the Corporate Democracy Act. Known as the Corporate Decency Act, this model legislation provided, in Title XVI:

Shareholders of every corporate entity subject to this Act shall have the right to nominate candidates for the board of directors if such candidates are supported by a reasonable absolute minimum number or percentage of shares, to be determined by the Securities and Exchange Commission. Only the actual or beneficial owners of stock are eligible to nominate a candidate or to vote for candidates. The corporate entity would provide equal funds to all nominees-the maximum amount to be determined by the Secretary of State.

In 1998, this same agenda was incorporated by the AFL-CIO into its Proxy Voting Guidelines, a document designed both to instruct trustees of Taft-Hartley pension funds regarding the Federation's preferred proxy-voting positions and to legitimize such votes when they might be contrary to traditional, primarily fiscal definitions of fiduciary responsibility. The 2003 edition of this document calls for not merely a majority, but a two-thirds majority, of directors to be independent, and echoes the call for the right of shareholders to advance nonmanagement candidates for the board, again enhanced by cumulative voting. Other guidelines encourage trustees to support board actions that are responsive to employees and other constituencies.

The Commission's proposal is precisely the sort of change proposed by the New Left activists four decades ago. If successful, the proposal is likely to undermine directors' independence and to create a new point of leverage through which to bring pressure against corporations.

The Proposed Rules Will Undermine Board Effectiveness

HR Policy Association believes that the Commission's proposal will undermine board effectiveness in two significant ways. First, the proposal actually undermines the idea of independent board members because any outside director who is successfully elected through the proposed process is virtually certain to represent a constituency that may have agendas other than the corporation's business success. Despite the proposed protections, such individuals, just like elected officials, will be motivated to put the interests of their constituencies ahead of those of the corporation. Second, as has been widely recognized, by having a minority member on the board, the potential of paralyzing board decision making is exponentially increased.

The Proposal Will Undermine the Concept of Board Independence

The Commission's proposal will have the effect of incrementally reducing the freedom of corporate boards to make decisions based on an independent assessment of the interests and well-being of the company and its shareholders.

By definition, allowing shareholders to pick their own director(s) means that the shareholders with the greatest aggregate of voting power at a company have the ability to use the mechanisms put in place by the Commission. As noted above, there are two primary groups who are motivated to use this process-public pension funds and social activists (labor unions, environmental groups, religious groups, and "corporate reformers"). Because these groups have often joined together to promote shareholder resolutions, it is likely that they would do so again to ensure board representation if this proposal were finalized. If successful, their candidates would be beholden to the groups that put the directors on the boards.

The Commission's proposal undermines the true definition of independence by enabling the election of directors who will represent specific viewpoints that may be antithetical to the corporation itself (and therefore, its shareholders). Traditional corporate governance theory holds that an independent director is one that does not have any business, financial. or familial ties to the corporation or its senior management. Further, when such an individual acts as a director, he or she is able to make decisions on behalf of all shareholders without a distinct bias toward or against current management.

SEC Commissioner Cynthia Glassman recently commented with respect to the process of selecting directors:

Regardless of whether shareholders like some or all of the board's director candidates, they should demand, and boards should deliver, a process that puts the decision in the hands of independent directors whose loyalties to shareholders are beyond question.28

The Glassman quote emphasizes that independent directors whose loyalty is to all shareholders is the key to good corporate management. Thus, the definition of independence goes beyond the financial or familial ties to the corporation. An individual who is elected to the board by a certain shareholder group, such as a union, is not independent. He or she would be representing the interests of that group and would be expected to vote and act in a manner consistent with views of the interest group when making corporate management decisions. This bias is contrary to one of the central reasons the board exists-to balance competing shareholder interests-and to sustaining the company's business success.

The Commission's Independence Standard Will Not Prevent the Rise of Constituent Directors

The Commission has proposed independence standards for board nominees in an effort to prevent unnecessary influence by outside groups on these directors. However, because the standards are written to ensure the independence associated with traditional board candidates, they do nothing to prevent interest groups from nominating like-minded directors obligated to the constituencies who elect them.

The proposed rule states that a board nominee may not be the nominating shareholder or an employee of the nominating shareholder or shareholder group within the current or immediately preceding calendar year.29 It would prevent those who have received consulting fees within the current or preceding calendar year, and it would prevent executive officers, directors, or those serving in similar capacities from serving as a nominee. Although these prohibitions may work well for typical corporate structures, they do not limit the ability of special interest shareholders to nominate constituent directors with narrow objectives.

For example, the proposed independence standards may prevent the nomination of an administrator of a public pension fund or a senior union official. However, they would not prevent the nomination of a professor who is more interested in promoting the agenda of a specific union than the corporation's business interests. These individuals would be closely aligned with the interests of the shareholder group that nominated them and would act in the group's interest as directors. The prohibitions contained in the proposed rule are insufficient to prevent the election of such constituent directors.

The Commission did recognize this concern in the Preamble to the proposed rules:

A number of commenters expressed concerns regarding the disruptive effect a security holder nomination procedure could have on board dynamics and board operation. A number of these comments related to the potential for "special interest" or "single issue" directors that would advance the interests of the nominating security holder over the interests of security holders as a group. While we recognize this concern, we believe that the procedure we propose today under Exchange Act Rule 14a-11 should afford a security holder or group meeting the proposed standards the ability to propose a candidate for director that, in the nominating security holder's view, is more qualified than those put forward by a nominating committee, board, management, or company.30

In essence, however, the Commission dismissed the potential effect of having a constituent director on the board as a nonissue. As long as the director passes the independence criteria-which appear to be written with corporate independence in mind, rather than the loose affiliations common among unions and other movement-oriented advocacy groups-the individual or entity may be a director nominee. Despite the criteria, the nominee very easily could be beholden to the nominating committee and paralyze board decisions. HR Policy Association believes that the independence criteria needs to be further refined to account for the differences between traditional corporate directors and advocacy interests such as unions and public pension funds.

The Proposal Could Paralyze Board Decision Making

The effect of choosing a director who is beholden to a particular constituency is likely to hamstring board decision making, especially on issues about which the member's constituency cares intensely. This is one reason that most governance reform recommendations shy away from recommending constituent-oriented board membership.

Professor O'Connor, the self-described progressive, admits that it is well recognized that constituent-oriented representation on a board "involves a potential threat that...conflict at the board level could seriously impede the process of directorial decision making."31 This is especially the case where the board member or members in question have attentive constituencies, which is typically the case with shareholder activists such as labor unions or their allies who are the most likely to pursue a board proxy challenge under the proposal.

Moreover, many advocates of greater employee involvement in corporate decision making and corporate governance have shied away from recommending direct shareholder nomination of directors or representation on the board.

For example, Professor O'Connor, an advocate for union shareholder activism, views having worker representatives on American boards of directors as unworkable because of the inevitable disruptions that would result.32 She notes that the Organization for Economic Cooperation and Development, in a guidance document on global governance, avoided recommending direct shareholder representation on boards and focused instead on good representation of all interests by the board.33

Even Germany, which currently includes works council representatives on its boards of directors, is beginning to reexamine this practice in an effort to enable its corporations to become more responsive to shareholders. Even though "at this point, talk of dismantling [the works councils] is a `social taboo,'"34 because of the history and culture of works councils, there is a realization that constituent-based directorships are not the best way to be responsive to shareholders generally. In sum, the Commission needs to pay close attention to the effects of its proposal in light of trends heading in the opposite direction.


The HR Policy Association believes that the Commission's proposal should be rejected. If successful, it represents one step in a continuous process by which labor unions and public pension fund trustees seek to convert corporations from engines of economic vitality into agents of social policy. Isolated examples of corporate malfeasance notwithstanding, the overwhelming majority of American companies are not only economically motivated but also responsive to the needs and expectations of their shareholders and the public at large. For this reason, the true public interest is found in sustaining their success, and the selection of members for corporate boards of directors ought to be left to the companies themselves, as they are best situated to match needs with qualifications.

Thank you for the opportunity to provide our views on this important matter.

Sincerely yours,

Jeffrey C. McGuiness


1 Jarol Manheim, Death of a Thousand Cuts: Corporate Campaigns and the Attack on the Corporation 169 (2001).

2 Thomas Greven and John Russo, Transnational `Corporate Campaigns': A Tool for Labour Unions in the Global Economy, Feb. 2003, at 7 (prepared for the International Industrial Relations Association, 13th World Congress).

3 Death of A Thousand Cuts, supra note 1, at 214.

4 Marleen O'Connor, Employees and Corporate Governance: Labor's Role in the American Corporate Governance Structure, 22 Comp. Lab. L. & Pol'y J. 97, 114 (Fall 2000).

5 Id. at 114-15.

6 Stewart J. Schwab and Randall S. Thomas, Realigning Corporate Governance: Shareholder Activism by Labor Unions, 96 Mich. L.Rev. 1018, 1022 (1998) [hereinafter Shareholder Activism by Labor Unions].

7 David Moberg, Union Pension Power: Labor Is Mobilizing Its Investment Power to Pressure Corporate America, The Nation, June 1, 1998, at 16 [hereinafter Union Pension Power].

8 Craig W. Palm and Mark A. Kearney, A Primer on the Basics of Directors' Duties in Delaware: The Rules of the Game (Part I), 40 Vill. L.Rev. 1297, 1300-01 (1995).

9 Edward B. Rock, The Logic and (Uncertain) Significance of Institutional Shareholder Activism, 79 Geo. L.J. 445, 466-67 (1991) (citing Bebchuk, The Debate on Contractual Freedom in Contract Law, 89 Colum. L.Rev. 1395, 1396-97 (1989)).

10 See, e.g., Proposed Rules on Security Holder Director Nominations, 68 Fed. Reg. 60,784, 60,786 (Oct. 23, 2003) [hereinafter "Proposed Director Nominations Rule"].

11 NASD and NYSE Rulemaking Relating to Corporate Governance, Release No. 34-48745 (Nov. 4, 2003), available at

12 Proposed Director Nominations Rule, 68 Fed. Reg. at 60,785.

13 In fact, those supporting greater shareholder access to the proxy, including unions and public pension funds, have already indicated that they will attempt to expand the rights under the proposal to gain additional leverage.

14 O'Connor, Labor's Role in the American Corporate Governance Structure, supra note 4, at 111.

15 Klaus Eppler and Paul Kamnitzer, Corporate Governance Activities of Institutional Investors and Other Activists, 1353 Practising Law Institute/Corporations 11 (Jan. 2003).

16 Id. See generally Shareholder Activism by Labor Unions, supra note 6.

17 Shareholder Activism by Labor Unions, supra note 6, at 1077 (quoting Richard Blodgett, Union Pension Fund Asset Management in Abuse on Wall Street: Conflicts of Interest in the Securities Markets 320, 327-28 (1980)).

18 Id. at 1023.

19 Id. at 1060.

20 Moberg, Union Pension Power, supra note 7, at 16.

21 Rock, The Logic and (Uncertain) Significance of Institutional Shareholder Activism, supra note 9, at 471-72.

22 CalPERS President, Vice-President Elected, CalPERS Press Release, Feb. 20, 2003, available at

23 O'Connor, Labor's Role in the American Corporate Governance Structure, supra note 4, at 113.

24 Eppler and Kamnitzer, Corporate Governance Activities of Institutional Investors and Other Activists, supra note 15, at 20.

25 Oral Testimony of CalPERS President of the Board of Administration, Sean Harrigan Before Senate Banking Committee, Sept. 23, 2003.

26 See Text of Advertisement at

27 Shareholder Activism by Labor Unions, supra note 6, at 1059.

28 SEC Commissioner Cynthia Glassman, "Remarks on Governance Reforms and the Role of Directors" Before the National Association of Corporate Directors, Oct. 20, 2003, available at

29 Proposed Director Nominations Rule, 68 Fed. Reg. 60,784, 60,820-21 (to be codified at 17 C.F.R. § 240.14a-11(c)(3)).

30 Proposed Director Nominations Rule, 68 Fed. Reg. 60,784, 60795.

31 O'Connor, Labor's Role in the American Corporate Governance Structure, supra note 4, at 108-09.

32 Id. at 109.

33 Id. at 125.

34 Id.