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SEC Proposal Would Cripple Shareholder Rights
Mindy Lubber, 24 Sep 07
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If you invested a few thousand dollars in a friend's business, would you feel entitled to voice your opinion about an issue facing the company? That's the crux of a controversial proposal by the Securities and Exchange Commission (SEC) concerning shareholder rights.

The SEC is considering several proposals to strip away the voice of shareholders -- specifically, by eliminating the right of investors to file shareholder resolutions with companies they own shares in or by making it more difficult to do so. It's a bad idea -- and especially troubling because this comes at precisely the same time shareholders are receiving more support on these resolutions from investors, especially on climate change.

Shareholder resolutions are an important vehicle for communicating with corporate boards, management and other investors on key issues such as governance reforms, employee diversity, executive compensation, human rights at overseas factories and climate change. Though management is not required to respond to them, resolutions provides investors, large and small, with a valuable seat at the table -- particularly at corporate annual meetings when investors can openly discuss their resolutions with management and board directors.

There is a long history of productive results from shareholder resolutions, demonstrated by companies making specific reforms, changing policies and increasing their disclosure and transparency. As a result of shareholder resolutions, more companies now require board members to be elected by majority votes and have diversified their boards. Scores of companies are also publishing corporate social responsibility reports as a result of shareholder resolutions.

Typically, about one-quarter to one-third of resolutions are withdrawn because constructive dialogues with companies result in win-win agreements. This year, for example, 15 of the 43 climate-related resolutions filed with US companies were withdrawn after the companies took positive actions. Among those win-wins was ConocoPhillips agreeing to set greenhouse gas reduction targets, boost spending on low-carbon technologies such as biofuels and support federal climate change legislation.

And many of the resolutions that are going to a vote are receiving record high support -- one telling example, the 31 percent of Exxon Mobil's shareholders who supported a resolution in May requesting that the oil giant set specific greenhouse gas reduction targets.

There are sane voices emerging on this issue. Last week outgoing SEC Commissioner Roel Campos, one of two Democrats on the five-member commission, called the SEC proposals "horrible" and "very bad." The Social Investment Forum and the Interfaith Center on Corporate Responsibility have launched a new web site to to organize opposition to the controversial SEC proposals. Several thousand emails have already been sent and many more are expected before the October 2 deadline for public comments.


Image: Street art, Paris. Credit: flickr/Felipe Bachomo

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