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Apria Shareholders May Propose Board

Under the health-care firm's policy, investors who meet criteria can nominate as many as two candidates a year.

June 12, 2003|Debora Vrana | Times Staff Writer

Apria Healthcare Group Inc., a Lake Forest-based provider of home health-care services, has become the first publicly traded company to voluntarily let investors propose new board members without a major proxy fight.

Under Apria's new policy, spelled out in documents filed Wednesday with the Securities and Exchange Commission, one or more stockholders who own at least 5% of Apria's common stock for at least two years can nominate as many as two candidates every year. The policy takes effect next year.

"It has become painfully obvious over the past few years that corporate America must improve boardroom dynamics. This has to start with a robust and inclusive process for determining board composition," said Ralph Whitworth, chairman of Apria's board.

Whitworth is a longtime shareholder activist who is also a principal at Relational Investors, a San Diego investment firm that takes stakes in troubled companies. Whitworth, who began buying Apria's stock in 1997, has seen share prices soar since he became chairman in 1998 to resolve a board dispute. He owns less than 1% of Apria stock.

Nell Minow, a shareholder activist who is also editor of the Corporate Library, a Web site that follows corporate governance issues, praised Apria's action.

"By voluntarily making the nomination process open to investors, they have single-handedly raised the standard for corporate governance and dared the rest of corporate America to do the same," Minow said. She noted that shareholder access to the board nomination process is "the single most important issue facing directors and shareholders."

Apria's move is likely to put more pressure on federal regulators to act on this issue as they wrestle with attempts to improve shareholder rights in the wake of a series of scandals in corporate America.

The SEC is taking public comments on the "proxy issue," involving investor access to board nominations, until this Friday. The agency's staff plans to make recommendations to the commission in a report due on July 15, said SEC spokesman Herb Perone.

"The staff will lay out all kinds of options for reform," Perone said Wednesday.

Apria's decision to adopt the new policy last week has enhanced the company's reputation for being on the cutting edge of corporate governance issues. Its board has been recognized as among the best in corporate America partly because Whitworth is one of three shareholder activists on Apria's nine-member board. The company also has a separate chairman and chief executive, a rarity.

"They have a reputation of being forward-looking in terms of corporate governance, so this is not surprising," said health-care analyst Balaji Gandhi, with Deutsche Bank Securities in New York.

Still, though the move was hailed as a positive one, Wall Street analysts such as Gandhi were not expecting others in the industry to follow Apria's example anytime soon.

"Besides Apria, most health-care companies are governed very traditionally" and are not likely to rush to change, Gandhi said.

Apria's next annual meeting is set for July 17 in Costa Mesa. Shares of Apria were off 22 cents Wednesday at $24.67 on the New York Stock Exchange.

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