|  | | 2005 News and Press Releases | | |
HEADLINE NEWS:
Cox Set To Bring In Net Proxy Reform Move By SEC Chairman Would Save Companies Money And Empower Dissatisfied Investors
Staff Writer – Financial Times
Securities Mosaic. November 28, 2005
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EXCERPT: Christopher Cox, chairman of the Securities and Exchange Commission since August, is set to embark on his first corporate governance initiative. The chief US financial regulator is tomorrow expected to propose that public companies be able to choose to provide shareholders with proxy statements via the internet. The SEC plan to reform how companies furnish shareholders with proxy statements has two features that are likely to become major themes of Mr Cox's time at the regulator. Firstly, it should save companies money. Secondly, it harnesses technology in an effort to give investors better information. But the significance of the SEC plan may also rest in how it could increase the number of contested board elections. These elections, where shareholders put up rival slates of candidates to those nominated by the company, are relatively rare in the US. Lucian Bebchuk, director of Harvard law school's corporate governance programme, found in a research paper that between 1996 and 2004, only 108 public companies faced contested board elections that were designed to oust sitting directors. Only 17 companies with market capitalisations of more than Dollars 200m faced such elections, and in just two cases were the rival slates of candidates triumphant. "The power of shareholders to replace the board is a central element of the accepted theory of the modern public corporation with dispersed ownership," said Mr Bebchuk. "This power, however, is largely a myth. The incidence of electoral challenges is extremely low, and the incidence of successful challenges is negligible in public firms of significant size." Mr Bebchuk said the SEC plan could increase the number of contested board elections. One of the barriers to more such elections has been that shareholders cannot afford the cost of printing and mailing their own proxy statements, where they list their preferred candidates for a board, to fellow investors. The SEC plan should dramatically cut the cost of the proxy process by allowing companies, and disgruntled shareholders, to put their statements on websites instead of in the post. Mr Bebchuk raised doubts, however, about whether the plan would significantly increase the number of successful attempts by shareholders to replace directors with their preferred candidates. He highlighted how shareholders had to engage in a sustained and potentially expensive campaign to woo investors after proxy statements were issued. The SEC initiative is therefore unlikely to satisfy some investors who were disappointed when William Donaldson, Mr Cox's predecessor, abandoned his plan to reform the proxy process. |
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