Tag Archives | Chamber

Investor Response to Chamber: Don’t Gut Rights

Investor Response to Chamber: Letter

Representatives of hundreds of investors with trillions of dollars in assets delivered a letter to the SEC on November 9, 2017, An Investor response to U.S. Chamber’s Proposal to Revise SEC Rule 14a-8 (report).

We noted with interest the November 1, 2017, guidance contained in Staff Legal Bulletin No. 14I. While we are reserving judgment about how the guidance may apply in practice, we are particularly pleased by Director Hinman’s accompanying statement that the guidance is not intended to “make things easier or harder for one side or the other, . . . [but] to improve the process.” We strongly support that goal and plan to actively monitor the SEC staff no-action process during the upcoming proxy season to determine whether the goal was achieved.

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Shareholder Society Better Chamber Mantra

A shareholder society appears to have no place in the U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) severely flawed paper on shareholder proposal reform. The paper is intended to contain a “set of recommendations for the SEC on fixing the broken Rule 14a-8 system in order to protect investors and make the public company model more attractive.”

However, the report attempts to solve our economic woes by eliminating shareholder rights. I criticized their report in my post Shareholder Proposal Reform Rebutted. Instead of seeking to amend Rule 14a-8 to create an essentially democratic-free zone for entrenched managers and boards, the Chamber should focus on creating a prosperous shareholder society where all Americans have a stake in our future. Continue Reading →

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Shareholder Proposal Reform Rebutted

Shareholder Proposal Reform

Shareholder Proposal Reform or Fat-Cat Entrenchment?

The U.S. Chamber of Commerce Center for Capital Markets Competitiveness (CCMC) released a paper on shareholder proposal reform, which contains a “set of recommendations for the SEC on fixing the broken Rule 14a-8 system in order to protect investors and make the public company model more attractive.” See also the Chamber’s press release, U.S. Chamber Offers Recommendations to SEC on Shareholder Proposal Reform.

Rule 14-8 is not broken, many of the Chamber’s attestations are alternative facts and its recommendations are more likely to hurt our economy than help it. The paper is very similar to their previously released Responsible Shareholder Engagement And Long-Term Value Creation: Modernizing the Shareholder Proposal Process. As I wrote in my rebuttal last year (Business Roundtable to SEC: Muzzle Shareholders),

‘modernization’ for the Business Roundtable means moving the SEC further and further from its primary mandate of ‘investor protection’ by creating a democracy-free zone for entrenched managers.

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Business Roundtable to SEC: Muzzle Shareholders

proxymonitorsmeasurecsmypropsAs I indicated yesterday, I have been contacted by several reporters for comments on the latest screed from the Business Roundtable seeking to muzzle the rights of shareholders. Although I have much more productive ways to occupy my time, it does make sense for me to provide at least some response, since the Business Roundtable names me among those “pursuing special interests… frequently at a significant cost to the company.”

Their statistics do not come from an objective third party, such as Proxy Insight, but from the conservative Manhattan Institute‘s Proxy Monitor (funded in part by the Koch Family Foundations), covering only 250 out of thousands of American companies. The Business Roundtable titled their report Responsible Shareholder Engagement And Long-Term Value Creation: Modernizing the Shareholder Proposal Process. Don’t be fooled by the numbers they use, claiming few proposals pass. The Business Roundtable doesn’t count proposals that don’t make it to the proxy because proponents and companies have reached agreement. They don’t count proposals filed at the thousands of small companies, which tend to have poorer corporate governance practices. ‘Modernization’ for the Business Roundtable means moving the SEC further and further from its primary mandate of ‘investor protection’ by creating a democracy-free zone for entrenched managers.  Continue Reading →

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No-Action Requests & the Business Roundtable

Most Popular Topics of No-Action Requests for 2016

Most Popular Topics of No-Action Requests

Yesterday, several reporters asked me to comment on no-action requests and the SEC’s denial to Apple, as well as the Business Roundtable’s fanciful notions regarding the need for reform of the proxy proposal process. I am reluctant to give the Business Roundtable’s proposal, Modernizing the Shareholder Proposal Processany more ink but will just touch on one of their issues here as I explain the Apple decision. 

No-Action Requests: Apple and Proxy Access Lite

The SEC has consistently denied no-action requests to companies where the proponent asks for modifications to bylaws when the companies have made no modifications in the direction requested. See H&R Block and Microsoft as prior examples. Apple is no exception. This is nothing new. Continue Reading →

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Lobbying Disclosure Sought by Investors

lobbying disclosureLobbying disclosure is sought by shareholder resolutions filed at 50 companies by 66 institutional and individual investors.

Corporate lobbying disclosure remains a top shareholder proposal topic for 2016. At least 66 investors have filed proposals at 50 companies asking for lobbying reports that include federal and state lobbying payments, payments to trade associations used for lobbying, and payments to any tax-exempt organization that writes and endorses model legislation. Political activity remains a top investor topic for the sixth consecutive year, with more than 90 proposals filed for 2016 that seek disclosure of either lobbying or political contributions. Continue Reading →

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Yes Men Best Chamber in Lawsuit

Maybe the SEC would be better off hiring the Yes Men to handle their rulemaking, rather than Robert Rice as SEC counsel, which could have a chilling impact on the SEC’s whistleblower program. (see SEC Chair Mary Jo White’s first big test by )

The Yes Men today implored the US Chamber of Commerce to reconsider their recent decision to withdraw the lawsuit they filed nearly four years ago, in a press conference on the steps of the lobbying giant itself. Said former defendant Andy Bichlbaum of the Continue Reading →

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Proxy Access: What Now, With Ban to be Lifted?

The SEC will not challenge the decision of the U.S. Court of Appeals for the District of Columbia Circuit, No. 10-1305, which struck down the agency’s rule to make it easier for shareowners to nominate directors to corporate boards. (see SEC Fails to Appeal on Proxy Access, 9/6/2011 and Statement by SEC Chairman Mary L. Schapiro on Proxy Access Litigation) That leaves Rule 14a-8(i)(8), which wasn’t challenged. I have a few recommendations for the path forward. According to the statement by Schapiro:

The Commission’s stay order provides that the stay of the effective date of the amendments to Rule 14a-8 and related rules will expire without further Commission action when the court’s decision is finalized, which is expected to be September 13. Accordingly, absent further Commission action, Rule 14a-8 will go into effect and a notice of the effective date of the amendments will be published.

In Proxy Access: Next Steps for Shareowners I noted that Rule 14a-8(i)(8) amendments adopted by the SEC were stayed by the Commission because they were Continue Reading →

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Law Professors Submit Amicus Brief in Proxy Access

A group of 36 law professors — including Harvard Law School Professors Victor Brudney and John Coates — joined an amicus brief responding to the arguments advanced by plaintiffs in the case (Business Roundtable and Chamber Of Commerce v. SEC). As the brief notes, the law professors do not hold the same views on the merits of or underlying policies behind Rule 14a-11, and differ on many issues concerning corporate governance and corporate law and policy. But the law professors are in agreement that Rule 14a-11 does not violate the First Amendment.

Among other things, the law professors’ brief points out that all of the First Amendment arguments advanced by plaintiffs would argue against the constitutionality of the SEC’s long-standing Rule 14a-8, which the Business Roundtable and Chamber of Commerce specifically chose not to challenge. More substantively, the brief emphasizes, shareholders are not “outsiders” or “third parties” to a corporation, but play a crucial role in a corporation’s “internal governance.” Shareholders would have undisputed rights to speak at a shareholder meeting — which the proxy rules attempt to reproduce for companies with widely dispersed shareholders. Perhaps most importantly, the Congress and the SEC have for over 70 years regulated securities by requiring disclosure. To subject the federal securities laws to strict First Amendment scrutiny would eviscerate the capital markets and impede capital formation at a moment when the nation’s economy most needs new investment.

via Law Professors Submit Amicus Brief in Proxy Access Case — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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CII Files Brief Supporting SEC Proxy Access Rule

The Council of Institutional Investors filed a brief strongly supporting the Securities and Exchange Commission’s (SEC) “proxy access” rule, rebutting claims of business groups seeking to overturn the rule.

The Council’s CII TIAA-CREF et al amicus brief 01-27-11, filed with TIAA-CREF and 14 other pension funds, was submitted January 27 in the U.S. Court of Appeals for the D.C. Circuit, in Business Roundtable and Chamber of Commerce of the United States of America v. Securities and Exchange Commission.

“Proxy access will make companies more responsive to their shareowners and more vigilant in their oversight of management,” said Ann Yerger, executive director of the Council of Institutional Investors, an association of public, union and corporate pension funds with combined assets in excess of $3 trillion. “This basic shareowner right is widely accepted in many countries. U.S. investors deserve this same, fundamental protection.”

Proxy access gives shareowners a meaningful voice in corporate board elections by letting them place their nominees for director on the company’s proxy card when they are dissatisfied with the board and want to run their own candidates. This allows investors to avoid the often-prohibitive cost of distributing their own proxy materials to other shareowners. The SEC last August approved a rule granting certain long-term investors proxy access at U.S. public companies. But the rule was not put into effect because of the Business Roundtable-Chamber lawsuit.

The Council’s brief argues that the benefits of proxy access far outweigh the costs, citing enhanced communication between investors and management in countries where proxy access is permitted. The increased dialogue “keeps directors in touch with market sentiment which strengthens board independence, reduces risk surprises and improves corporate governance,” the Council and pension funds contend. The brief also dismisses business claims that the proxy access rule will saddle corporate boards with special-interest nominees

See also, CalPERSattachment-CIIpublicationEqualAccess (an attachment to a CalPERS Board meeting agenda from years ago).

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Video Friday: This Week in the Boardroom, Proxy Access Stalled

Boardmember.com is a great source for corporate governance videos every week. TK Kerstetter, President, Corporate Board Member does a good job with his interviews, such as the 11/11/2010 one with Thomas Quaadman, VP, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce. (This Week in the Boardroom – 11/11/10 – Boardmember.com) However, the guests and chatter too frequently reveal a bias towards management.

Directors are elected by shareowners, yet on This Week in the Boardroom we are much more likely to hear from the Chamber of Commerce than from the Council of Institutional Investors. Isn’t it about time than shareowners had access to the boardroom? Access to the proxy has been delayed. That’s no reason to delay access to this important weekly news show.

See also Corporate Board Member’s recent discussion with Brian Cartwright, former general counsel of the Securities and Exchange Commission and senior advisor, Latham & Watkins LLP, about the 2011 proxy season and what boards can do to prepare for the possible passage of proxy access. (Talking Points: Proxy Access Stalled But Still Important for Boards to Consider)

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A Failure of Governance

Many leading companies strive to follow best practices in corporate governance, demonstrating responsiveness to investors and protecting shareowner value in the process. Paradoxically these same companies often appear to leave their commitment to good corporate governance at the doorstep when they serve on the board of the U.S. Chamber of Commerce (the Chamber). In so doing, they perpetuate a dismal failure of governance.

How so? Many of these companies demonstrate strong environmental and social policies and urge their suppliers to follow suit. Yet sadly, they are silent at Chamber board meetings despite the association’s aggressive actions to undermine sustainable business practices.

The Chamber has always been a powerful force in Washington, lobbying and influencing elections. In the last two years, led by CEO Tom Donohue, it has attacked a wide range of issues including healthcare, climate change, and financial market reforms. The Chamber announced it would spend $75 million in political campaigns in 2010 with one goal being to unseat all congressional members who voted for health care reform. The funds for this partisan political fight were raised and spent in secret, with no public accounting or transparency.

Similarly, the Chamber, allegedly on behalf of the business community, lobbies, speaks publicly and puts political dollars to work effectively challenging company positions on environmental matters. Recently, the Chamber sued the EPA to block its ability to mitigate climate change through regulation.

The Chamber’s website states:

Directors determine the U.S. Chamber’s policy positions on business issues and advise the U.S. Chamber on appropriate strategies to pursue.  Through their participation in meetings and activities held across the nation, Directors help implement and promote U.S. Chamber policies and objectives.

Hence Walden, with other investors, has discussed with dozens of companies how membership on the Chamber board may be perceived as supporting the Chamber’s policies. Sadly, we are learning that Chamber board members rarely speak out publicly, or even privately at Board meetings, to challenge its anti-environmental positions. Nor do they confront the Chamber on its partisan political activities.

Clearly there are multiple contradictions between the environmental policies of Accenture, IBM, Pepsi, Pfizer, and UPS – all board members – and the Chamber’s antagonistic actions against climate change legislation and regulation. Yet, as Board members they set and oversee these very policies and campaigns that undercut their companies’ positions – a perplexing way to spend shareowner dollars.

It is time for Chamber board members to end this pattern of compliant and passive acceptance. It is not acceptable to allow anti-environmental policies to flourish and partisan political campaigns shrouded in secrecy to be the order of the day. A respect for good governance requires companies sitting on the Chamber board to stand up and be counted or head for the exit.

Guest post by Timothy Smith, Senior Vice President and Director of ESG Shareowner Engagement at Walden Asset Management, a leader in socially responsive investing since 1975.  See also, Resolutions Challenge Chamber Board Members on Political Expenditures, 11/15/2010.

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Proxy Access Update

As previously reported, after being sued by the Business Roundtable and the Chamber of Commerce, the SEC stayed new Rule 14a-11 and amendments to Rule 14a-8 regarding “proxy access.” According to an October 15 client alert from Reed Smith:

On October 8, 2010, the petitioners and the Commission jointly filed a Motion for Expedited Consideration with the court. The motion seeks court approval of a briefing schedule negotiated by the parties that calls for the petitioners’ opening brief to be filed by November 30, 2010, and contemplates that briefing will be completed by February 25, 2011. The motion also requested that oral argument be scheduled in the case on the earliest available date following the completion of briefing. In the Motion, the parties jointly stated that the stay granted by the Commission pending review by the court, even with the review being on an expedited basis, necessarily means that the Commission’s rule changes will not be available for use by shareholders during the 2010-2011 proxy season, but that expedited review would help ensure that outstanding uncertainty about the rules’ validity will be resolved before the 2011-2012 proxy season.

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BRT & Chamber Sue Over Proxy Access

As expected, the U.S. Chamber of Commerce and Business Roundtable filed a legal challenge to the SEC’s proxy access rules requiring a corporation to include in its proxy materials director nominees put forward by a shareholder (or group of shareholders) who have owned three percent or more of company stock for at least three years. Eugene Scalia and Amy Goodman of Gibson, Dunn, and Crutcher LLP will be counsel to the Chamber and Business Roundtable on this litigation.

In a petition for review filed in the U.S. Court of Appeals for the District of Columbia Circuit, the Chamber and Business Roundtable charge that the rule is arbitrary and capricious, violates the Administrative Procedure Act, and that the SEC failed to properly assess the rule’s effects on “efficiency, competition and capital formation” as required by law. In adopting the rule, the SEC:

  • Erred in appraising the costs that proxy access would impose on American corporations, shareholders, and workers at a time our economy can least afford it. For example, the Commission essentially disregarded numerous commenters who explained that the rule will be misused by special interest investors such as labor union pension funds and state pension funds;
  • Ignored evidence and studies highlighting the adverse consequences of proxy access, including that activist shareholders would use the rule as leverage to further their special interest agendas;
  • Claimed to be empowering shareholders, but actually restricted shareholders’ ability to prevent special interest shareholders from triggering costly election contests; and
  • Claimed to be effectuating state law rights, but gave short shrift to existing state laws regarding access to the proxy and related principles, including the law in Delaware and the Model Business Corporation Act, and created significant ambiguities regarding the application of federal and state law to the nomination and election process.
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Transfer agents have launched ReformTheProxyVoteSystem.com. The site is designed to remove the “wall that’s preventing your company from gaining direct access to your shareholders” by urging shareowners to comment on the SEC’s proxy plumbing concept release. The comment period ends October 20.

List of helpful resources. Among the most influential responders: the Shareholder Communications Coalition; Study of the OBO/NOBO System, prepared by Alan L. Beller and Janet L. Fisher, with Rebecca Taub for the Council of Institutional Investors; and the Center for Capital Markets Competitiveness, U.S. Chamber of Commerce. (New website promotes proxy plumbing changes, Inside Investor Relations, 9/27/10)

Frankly, I haven’t decided how I’m coming down on some of these issues. I’m torm between the advantages that go to those with direct registration (such as obtaining a real proxy, instead of a VIF) and the idea that voters and votes should be kept confidential so that corporate management can’t unduly influence votes.

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Who Funds Chamber Attacks?

The U.S. Chamber of Commerce recently revised its published membership numbers from 3 million to 300,000 after Mother Jones uncovered it was playing games with its numbers. But even the revised numbers are misleading, since the Chamber’s 25 largest contributors provided a staggering $54 million to the Chamber in 2008, accounting for 39% of its $140 million in total contributions. One contributor gave the Chamber $15.3 million in 2008. The Chamber has not disclosed any of the contributors’ names.

As National Journal exposed just last week, this is exactly what five of the nation’s largest health care providers have been doing. Though publicly supporting President Obama’s health care reform efforts, Aetna, Cigna, Humana, UnitedHealth Group and Wellpoint secretly funneled $10 million to $20 million to the Chamber in the latter half of 2009 to fund ads aimed at killing health care reform.

Now, the Chamber is using the same type of financing to oppose the proposed Consumer Financial Protection Agency (CFPA). They will cloak their opposition in false claims about the CFPA’s impact on small business, but the Chamber’s opposition is really about the major financial services firms that we believe secretly bankroll the Chamber and its multi-million dollar campaign to defeat the CFPA, says Americans for Financial Reform, a coalition of over 200 national, state and local consumer, labor, retiree, investor, community, business, and civil rights organizations who are campaigning for real reform in our nation’s financial system.

“Neither Congress nor the American public should have to accept the Chamber’s misleading and self-serving misrepresentations of its membership and their contributions,” AFRtoSenateLetterJan20-2010) states.  “We deserve to know who is really bankrolling this effort to keep a broken status quo in place.”

The ongoing unwillingness of Wall Street bankers to lend, despite trillions of dollars of taxpayer money provided to them through the bailout, is not the result of “the uncertainty in regulatory standards and increased liability” created by the recently proposed CFPA, as the Chamber asserts. Rather, it is result of the banks’ uncertainty about their own balance sheets following years of excessive risk-taking and questionable lending practices that was made possible by the risky and incomprehensible consumer financial products they themselves created under a regime of inadequate and incoherent regulatory oversight.

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