Republicans aren't giving ground: "We have to make sure that we proceed carefully here," said Republican SEC Commissioner Paul S. Atkins, who worries that narrow interests might "play fast and loose with the rules" to place their allies on a corporate board.
One area of dispute is the timing. As currently written, the proposal would apply retroactively to the beginning of this year -- fine print that could have far-reaching implications for Disney if it remains in the plan.
That is because the large withhold vote aimed at Eisner is enough to trigger a board challenge, if investors representing 5% of the ownership were to agree on such a move at next year's annual meeting.
While SEC insiders were far from certain that the retroactive requirement would remain in the plan, shareholder advocates last week could not help but wonder whether Disney's restless investors had set in motion the fateful, first exercise of the new powers.
"If the rule, as proposed, goes forward, we're off to the races," said Nell Minow, editor of the Corporate Library, a shareholder advocacy group.
Just how much influence the SEC plan would actually confer on shareholders remains a matter of dispute. Still, many believe it would represent a noteworthy change in the traditional balance of power between investors and management.
In that sense, the furor at Disney may be telling. Few shareholders have the means and influence of Eisner's main antagonists, Roy Disney and Stanley Gold (both of whom, not surprisingly, support the SEC proxy reform plan as a good first step toward empowering shareholders).
The campaign by the two former Disney board members to get shareholders to withhold support from Eisner "had as much success as it had because of their willingness to fly around the country in their private plane and meet with all these institutional investors back to back to back," said Gregory P. Taxin, chief executive at Glass, Lewis & Co., a research firm for institutional investors.
"This is not an act that can be easily repeated at some other company," Taxin noted.
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Vote Revolts
A look at some other high-profile examples of shareholder backlash against corporate directors, and how the targets fared:
2003: At AOL Time Warner's annual meeting, 22% of shareholders withhold their votes for board member Steve Case. Case, anticipating the negative vote, resigns beforehand as chairman. Case remains on the board today.
2002: At Lockheed Martin, 28% of shareholders withhold their votes for director Frank Savage in a reelection challenge linked to his role as an Enron director. Savage remains on the board today.
2001: Service Employees International Union and other major investors urge Eastman Kodak shareholders to withhold support from four board members; about 17% of shareholders do so. One of the four directors leaves the board the next year. The other three remain on the board today.
2001: At mining company Freeport McMoRan Copper & Gold, a challenge led by New York City pension funds causes shareholders to withhold 18% to 25% of votes for a slate of five directors. The next year, in voting on a different set of directors, shareholders withhold nearly 39% of votes. Despite the votes, board membership remains largely unchanged today.
Source: Times research
Los Angeles Times
