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| 2003
News and Press Releases |
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HEADLINE:
Shareholder Activism Seen In Proxy Proposals
By: Tamara Loomis - New York Law Journal
Law.com. June 17, 2003
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EXCERPT: The recent wave of corporate scandals has spurred Congress, federal and state prosecutors and even the courts into taking action, championing the cause of defrauded investors left holding the bag. Now it is the investors themselves who are taking charge. Their weapon of choice is the shareholder or proxy proposal, and they are wielding it in record numbers. So far this year, more than half of the nation's 2,000 largest public companies have been hit with shareholder resolutions, according to the Investor Responsibility Research Center (IRRC), an independent Washington, D.C.-based research firm. The 1,082 proposals filed in 2003 is more than a third higher than the 800 or so filed the previous year. About three-quarters of the resolutions filed this year concern corporate governance; the rest deal with social and environmental issues. Even more dramatic is a three-fold increase in proposals attacking executive compensation: some 324 so far this year, up from just 106 the previous year. "Investors see these rotten portfolio statements coming in and at the same time executive pay packages that are simply out of control," said Michelle Soule, director of marketing at IRRC. "They're saying it's got to stop." In addition to issues of executive compensation, other popular proposals include splitting the offices of CEO and chairman and getting off-shore companies to reincorporate in the United States, said Todd E. Mason, a partner at Mintz, Levin Cohn, Ferris, Glovsky and Popeo. Corporate governance experts said they were not at all surprised by the increase in stockholder proposals, given the focus on governance in the post-Enron era. Mason also pointed out that technology has facilitated stockholder activism. For instance, he said that many big corporations now allow stockholders to cast their votes online. Investors have also passed a record number of resolutions: more than 125 as of the end of last month, with the total for the year expected to reach 150, or 50 percent more than in 2002, itself a record year. Leading the effort are public and union pension funds and other powerful institutional investors. Individual shareholders have a much tougher time getting proposals into proxy statements because of the "very technical and complicated rules" governing them, said Stephen J. Gulotta Jr., a partner at Mintz Levin. This year already, shareholders have won initiatives to limit executive severance packages at Verizon Communications Inc., Sprint Corp. and GlaxoSmithKline Plc; to expense stock options at Apple Computer Inc., Eastman Kodak Co. and J.C. Penney Co. Inc.; to hold annual elections of boards of directors at Avon Co. Inc., The Boeing Co. and Weyerhaeuser Co.; and to oppose the anti-takeover provisions known as poison pills at Yahoo Inc., Delphi Corp. and Southwest Airlines Co. And each time they did so over management's opposition. At the end of the day, the impact of this record wave of investor activism may be limited because shareholder resolutions are not binding. Companies have to consider them but not necessarily enact them.
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