October 1, 2007
The As You Sow Foundation, an organization dedicated to corporate responsibility - is deeply concerned that the Securities and Exchange Commission may soon act to eliminate or cripple the rights of Americans to present resolutions for votes by the shareholder owners of publicly traded companies.
As You Sow opposes SEC initiatives that would (1) severely curb the rights of shareholders to sponsor proxy resolutions and/or (2) limit or flat-out prohibit the ability of shareholders to nominate members of corporate boards. As an active institutional investor representing a broad range of stakeholders, we urge you to support efforts to protect shareholder rights
The severe curbs on shareholder input process put forward by the SEC are solutions in search of a problem. There is no documented problem or problems that would justify such extreme restrictions on shareholder rights. It would be better for the SEC to take no action on their shareholder resolution initiatives than it would be to irreparably harm a process that effectively informs our civic economy.
The potential SEC restrictions are so harsh that they would kill more than nine out of 10 resolutions filed by shareholders. Over 95 percent of the shareholder resolutions filed in the last 35 years have been advisory and these would vanish under one or more of the approaches outlined by the SEC. Well under 20 percent of publicly traded companies face shareholder resolutions in a typical proxy season. The current process works and any restrictions will weaken or cripple shareholder ability to assert their ownership rights
The shareholder resolution process helps U.S. companies, it does not hinder them. Shareholder resolutions have had a profound and beneficial impact on corporations, making them stronger and more competitive. The resolutions help to promote positive dialogue that results in improved corporate governance, greater accountability and more meaningful disclosure. These resolutions address a range of topics of concern to the investors who own these companies and have resulted in positive changes in company policies and practices, including in the area of executive compensation, environmental pollution, climate-related improvements, and minority/gender hiring practices, among others. Institutional investors representing public pension funds and mutual fund holders have contributed to increasing participation in this highly effective process.
Shareholders of Americas companies should be able to influence the selection of board members. The two approaches that the SEC has put out for public comment represent completely contradictory positions on the right of investors to nominate candidates for corporate boards of directors by putting candidates on the annual proxy statement and allowing them to be voted on along with the slate prepared by the company. It is apparent that investors strongly want this right that the SEC is refusing to provide. Investors should be able to nominate directors the bar for doing so should not be set so impossibly high that it could be exercised only by mega-investors who own 5 percent or more of the company.
We urge you to increase shareholder rights and corporate accountability - not hinder it.
Michael Passoff
Associate Director
Corporate Social Responsibility Program
As You Sow