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CEOs Urge SEC to Block Proxy Reforms

At issue is whether shareholders should have a greater say about who sits on corporate boards.

June 17, 2003|From Bloomberg News

WASHINGTON — Chief executives of the biggest U.S. companies are urging the Securities and Exchange Commission to block a plan to make it easier for shareholders to put proposals and director candidates to a vote by fellow investors.

But some shareholder advocates, angered by the corporate scandals of the last year, say regulators should ease the proxy ballot process in the name of better corporate governance.

The comments from the two sides were filed with the SEC through Friday, the deadline the agency had set for input on the contentious issue.

Pfizer Inc. Chief Executive Henry A. McKinnell, writing on behalf of the Business Roundtable, which represents 150 CEOs at large U.S. firms, said changing the voting rules would cause confusion and undermine recent efforts to increase independence of board nominating committees.

"Direct shareholder access to company proxy statements would undercut the role of the board and its nominating committee in the important process of nominating director candidates," McKinnell wrote.

The SEC sought public comment as part of a staff review ordered by Chairman William H. Donaldson to examine ways to increase shareholder influence in companies. Company-nominated board members often are beholden to management, which vetoes unwanted candidates or handpicks nominees at many companies, critics say.

"This is all about the responsibility of the directors -- continuity and experience versus culpability and accountability," said William Patterson, director of the AFL-CIO's Office of Investment.

Under current rules, dissident board candidates must send their proxies to shareholders, a strategy that could cost tens of thousands of dollars and has slim prospects for success.

Shareholders also complain that non-binding resolutions to tie executive compensation to stock performance or eliminate anti-takeover provisions often are ignored by executives.

"The proxy vote is extremely important for funds, like ours, that do not always have the choice to divest a holding due to poor corporate governance," Sheila Beckett, executive director of the $17-billion Employees Retirement System of Texas, told the SEC.

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