Treasurer of State
State of Maine|
Office of the Treasurer of State
39 State House Station
Augusta ME 04333-0039
207.624-7477 (voice) 207.287-2367 (fax)
December 22, 2003
Mr. Jonathan G. Katz
Secretary, United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609
||File No. S7-19-03|
Security Holder Director Nominations
Dear Mr. Katz:
I am writing in support of the Securities and Exchange Commission's proposed rule concerning Security Holder Director Nominations (34-48626). The SEC's proposed rule serves the best interest of all investors, large and small and I commend you for taking action. However, I urge Commission to strengthen the rule according to the recommendations of the National Coalition for Corporate Reform (NCCR).
Specifically, with regard to proxy access triggers, I request that the SEC strengthen proposed triggers and add additional triggers:
- The withhold threshold in the first trigger should be lowered from the proposed 35% to 20%. Our analysis of recent withhold votes indicates that there have been no cases of a 35 percent withhold vote in a sample of 100 Fortune 500 companies. In the same sample, a 20% withhold vote was achieved at 15% of the companies. Clearly, 20% is a significant hurdle for shareholders undertaking a withhold campaign, but one that is more reasonable than 35%.
- The 1% ownership threshold in the second trigger should be removed. It is unnecessary. The ultimate vote to trigger proxy access will determine the validity of the proposal.
- A third trigger based on a company's inaction on a shareholder proposal that receives a majority vote should be added. I strongly believe that shareholders should have proxy access when a board fails to act on a majority vote proposal. A majority vote is a strong directive from the owners of the company to act on a particular issue that should not be disregarded, often year after year. Nothing is a clearer indication of an ineffective proxy process than a board's failure to act on majority vote proposals.
- Additional triggers tied to specific events should be added, and these triggers should not require other triggers that delay proxy access for an additional year. Such triggering events might include SEC enforcement actions, criminal indictments of any executives or directors, material restatements, market delistings, or significant share under-performance.
I stand with the NCCR on these issues as well:
- Once proxy access is triggered, it should be granted to shareholder groups owning more than 3% of a company's securities, not 5%. An analysis of the holdings of the three largest institutional investors - CalPERS, CalSTRS and NYSCRF - concludes that it would be necessary to assemble a group of nearly all public pension funds to achieve 5% ownership.
- The number of permitted nominees should not be less than two. At least two are needed to provide shareholders adequate representation.
- The rule, once triggered, should remain operative for a period of five years. Shareholders need more than the proposed two-year period to determine whether proxy access is even necessary.
These enhancements to the rule you have proposed will, I believe, strengthen American corporations and safeguard shareholder value.
Maine State Treasurer