Corporate Interests Widely Decry SEC's Plan on Proxy Reform
WASHINGTON — The lawyer hired by Walt Disney Co. to help fend off a takeover bid by Comcast Corp. told the Securities and Exchange Commission on Wednesday that its plan to give investors a greater voice in board struggles was a major blunder.
The criticism from Martin Lipton, who wasn't speaking on behalf of Disney, reflected widespread opposition by corporate interests to the SEC's plan.
"I think it's a very serious mistake to take this step at this time," said Lipton, a famed anti-takeover strategist known for designing the "poison pill" defense for corporations trying to deflect unwanted purchasers.
Lipton made his remark at an SEC roundtable in which regulators heard sharply divergent views of their plan to give investors, under certain circumstances, use of a company's election materials to compete for spots on a corporate board.
The proposal -- backed in broad terms by major institutional investors and shareholder activists -- has sparked the most public comment of any proposal in the agency's history.
On Wednesday, three of the SEC's five commissioners expressed support for the general approach, indicating that a version of the plan would be approved this year.
SEC Chairman William H. Donaldson, a Republican, described the proposal as an alternative for unhappy investors who currently have no choice but to sell their stock or dig into their pockets to mount expensive, independent board campaigns.
In corporate board elections, investors may withhold their votes in symbolic protest -- like many did at Disney's meeting last week -- but such actions aren't binding.
Alternatively, dissidents must pay for a corporate election campaign, a costly undertaking that requires printing and mailing ballots to all of the company shareholders.
"The proposal
Under the SEC plan, a board challenge could begin if at least 35% of the shareholders withhold support from a board candidate in the election at the annual meeting.
Alternatively, a shareholder group owning 1% of the stock could propose a challenge, and it would then need to win a majority of shareholder votes.
At the next annual meeting, investors representing 5% of the company's stock could place one or two candidates on the corporate ballots, with the number of candidates tied to the size of the board.
