August 29, 2009
I am in support of Rule 14-A, which would allow 1% shareholders of at least a year's duration to nominate up to 25% of the members of the board of directors.
I bought my first stock over 40 years ago, and was taken aback then by the undemocratic way that only management's nominees were on the ballot for the board of directors. This has continued to be a concern ever since.
Things have only gotten worse over the intervening decades, with generally rubber stamp boards giving CEOs pay far in excess of what is justified.
Not that many years ago, the average CEO made dozens of times more than the lowest paid worker for that same company. Now it is hundreds of times. The job isn't that much more difficult (maybe less difficult) nor has the supply of qualified CEO candidates markedly shrunk (it's likely expanded). Instead, rubber stamp boards effectively controlled by management hire sweetheart pay consultants to demonstrate that "our" CEO is being paid "less than average."
The effect is to ratchet up pay ad infinitum across the board. This has to stop, before CEOs continue garnering an ever increasing share of the corporate earnings pie. The SEC's proposal will effectively lessen this rapacious tendency on the part of CEOs to milk the system in their favor and against the interests of shareholders.
Premiere investor of our time Warren Buffet after serving on some boards said asking critical questions of management during board meetings was like "belching at a dinner party." Power corrupts, and absolute power corrupts absolutely. Please move the needle away from the corrupting power now held by CEOs and give some of it to the owners of the company, the stockholders.
Although theoretically shareholders could change the rules to elect board members, as a practical matter, it isn't going to happen. If it could have happened it would have by now at many companies, instead of just a handful. Management holds way too many of the cards. It's time for the SEC to come out in favor of the stockholders on this issue.
If anything, the SEC's proposal doesn't go far enough, but at least it's a step in the right direction. Please don't succumb to pressure to water it down. Stick to your guns.
Karl Putnam Ph.D.