WASHINGTON — The outburst of shareholder ire at Walt Disney Co. last week did more than cost Michael Eisner his job as board chairman.
It also increased pressure on the Securities and Exchange Commission to move ahead with a plan to give investors a louder voice in elections throughout corporate America.
"You couldn't come up with a more graphic example of why it's needed," said Patrick S. McGurn, senior vice president of Institutional Shareholder Services, which advises pension funds and other major Wall Street investors.
The SEC measure would make it easier for big investors to mount dissident campaigns for the board, using a company's official election materials in the quest.
That would be a sharp departure from the traditional state of affairs in which unhappy shareholders have little choice but to withhold their votes, as they did at Disney, or to mount costly, independent challenges, as Disney dissidents Roy E. Disney and Stanley P. Gold are mulling.
In proposing a change, federal regulators have sparked the largest outpouring of public comment in the agency's history -- more than 13,000 letters, most supporting the change or pushing regulators to go further.
Moreover, the proposal has exposed a deep partisan divide among the five members of the usually collegial SEC, and brought dire warnings from corporate America that companies would face a disruptive barrage of shareholder revolts.
"I've never seen a more sharp and more emotional debate between corporations and shareholders," said Richard H. Koppes, an attorney with Jones Day in Sacramento and Los Angeles, and former general counsel at the California Public Employees' Retirement System, one of the groups that turned thumbs down on Eisner.
Under the proposal, which is backed by SEC Chairman William H. Donaldson, large shareholders who surmount a series of hurdles would for the first time get the right to place names of board candidates on company mailings and ballots.
The challenge could begin, for instance, if at least 35% of the shareholders withheld their support from a board candidate during an election -- a test more than met at Disney, where the tally to withhold for Eisner reached 43%.
Alternatively, a shareholder group owning 1% of the stock could propose a challenge, and that proposal would need to win a majority of shareholder votes. Either way, the following year, investors representing 5% of the company's stock could put candidates on the official corporate ballots.
