Tag Archives | proxy voting

Apple: My "Say on Director Pay" Proposal & How I'm Voting

Apple (AAPL) is one of the stocks in my portfolio. Their annual meeting is coming up on February 23, 2012 (Thursday). This is one meeting I’ll be attending in person, both to vote and to move my motion to provide shareowners with a “say on directors pay.”

When I last looked, MoxyVote.com had recommendations from twelve “good causes.”  ProxyDemocracy.org had four participating funds voting. Continue Reading →

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Corporate Directors Forum 2012 – Part 1: Shareholder Hot Topics

These are some relatively quick notes that I’m sharing from the Corporate Directors Forum 2012, held on the beautiful campus of the University of San Diego, January 22-24, 2012. Since I am busy with no-action requests this proxy season (especially proxy access proposals), this post may be a cryptic… not complete sentences bt hopefully mor intelligible thN txt msgN. Continue Reading →

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ISS Webinars: Key Governance Issues

Webinars on U.S. and European policy perspectives will provide valuable insight into the key corporate governance issues facing investors and companies for 2012.

European Policy Perspectives: Tuesday, December 6, 2011, 2:30 PM GMT, 3:30 PM CET. Presented by ISS’ Jean-Nicolas Caprasse, Head of Business, Europe; Daniel Jarman, Head of U.K. Research; Thomas von Oehsen, Head of German-Dutch Research, ISS and Eva Chauvet, Senior Analyst, French Research, ISS, this webinar will give an overview of key updates to ISS’ benchmark European proxy voting policies for the 2012 proxy season.

U.S. Policy Perspectives: Wednesday, December 7, 2011, 11:00 AM EST. Presented by ISS’ Dr. Martha Carter, Head of Governance Research; Carol Bowie, Head of U.S. Compensation Research; and Patrick McGurn, Special Counsel, it will give an overview of key updates to ISS’ benchmark U.S. proxy voting policies for the 2012 proxy season.

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ISS Updates Proxy Voting Guidelines

Institutional Shareholder Services Inc. (ISS), the largest proxy advisory, released 2012 updates to its U.S., Canadian, European, and international benchmark proxy voting guidelines.

The global updates are the result of an extensive consultation process that included outreach to and input from institutional investors and corporate issuers worldwide. ISS analysts will begin applying the updated policies to all publicly-traded companies with Continue Reading →

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Future Corporate Voting

Keith Paul Bishop writes:

Section 951 of the Dodd-Frank Act requires companies that are subject to the SEC’s proxy rules to include in their proxy statements “a separate resolution subject to shareholder vote” to determine whether a shareholder vote on executive compensation will occur every 1, 2, or 3 years.   When the SEC was considering amendments to its rules to implement this Continue Reading →

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ISS Solicits Comments on 2012 Proxy Voting Policies

Institutional Shareholder Services Inc. (ISS) opened its comment period for their 2012 proxy voting policies.  Institutional investors, corporate issuers, and governance market participants are invited to provide feedback on ISS’ policy updates until October 31.  According to Martha Carter, ISS’ Head of Global Research,

ISS firmly believes that incorporating multiple views on corporate governance issues is critical for effective policy formulation. The uniquely transparent and collaborative nature of our policy formulation process serves not only to inform our policies, but also helps to create a higher level of understanding and dialogue across the corporate governance community.

I submitted comments to earlier draft policies and will participate in this round as well. I hope readers do the same. It is great that ISS uses such a transparent process, consistent with what they expect of corporations.

Over 300 respondents weighed in on issues ranging from executive compensation and director independence, to engagement triggers and social & environmental issues. The full results from the survey are posted to ISS’ Policy Gateway.

ISS will release its final 2012 U.S. and International Policy updates in the week of November 14 and its Global Policy Summary and Concise Guidelines in December.

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GMI & Si2 Offer Combined ESG Proxy Research

GMI and Si2 announced a strategic partnership to provide seamless
subscription access, account management and special pricing to the firms’ ESG Board Briefing Research, Shareholder Proposal Analysis, and Executive Pay Scorecards. The combination of GMI’s compensation analysis with Si2’s expert insights into key environmental and social issues and proposal analysis may create a vital new resource for Continue Reading →

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Blanks Votes: Australia & US

It is great to see Manifest, the proxy voting agency, raising the issue of management voting proxy items left blank by shareowners.

In the majority of markets with developed shareholder voting procedures, for each proposal, the shareholder has three choices; to vote for, against or abstain. Alternatively, shareholders can actively elect for the chairman to direct their votes at his/her discretion (a directed proxy). In cases where the shareholder has not made a choice in any regard (an undirected proxy), it is common for Continue Reading →

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Will 2011 be a Watershed Year for Activism?

2011 was the first proxy season in which companies were required to provide advisory votes on executive compensation. Corporate governance advocates, mindful of the fact that annual compensation for CEOs at S&P 500 companies increased by 35% in 2010, might well find themselves agreeing with James McRitchie of CorpGov.net, who told SocialFunds.com in June, “2011 could be a watershed year if next year people look back and wonder why the hell they didn’t do anything.”

…board declassification, a majority voting standard, an independent board chair, and reporting on political spending, received more than Continue Reading →

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Governance Roadshows Prepare for Proxy Season

Francis Byrd, Laurel Hill Advisory Group, Jeffrey Morgan, National Investor Relations Institute and Kenneth Wagner, Peabody Energy Corporation, discussed the governance roadshow idea at the Society of Corporate Secretaries and Governance Professionals conference in June.

Now might be the time to begin preparing to engage shareholders with such an effort – especially since the recent stock market slide is likely to make the largest investors even more edgy. Such an effort can alert directors to areas where policy adjustments can head off problem areas, allowing companies to retain the trust and confidence of shareowners.

Morgan suggests traveling to visit key investors during the off-season to keep communications open and to develop relationships that may come in handy later.  Byrd says, ‘This will help you prepare the board to deal with the governance issues most important to the shareholders.’ Wagner suggests that directors sit down with the largest investors and answer their questions on compensation and other governance topics.

Read more: Is it time for a governance road show? Corporate Secretary, 8/12/2011.

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Will Netflix Listen to Shareowners?

eBay moved to eliminate supermajority requirements in its bylaws at its first regularly scheduled meeting after shareowners approved a ballot measure by John Chevedden. So far, no real word from Netflix on whether or not they will heed the will of shareowners.

It is great to see this issue covered by Bocco Pendola in Seeking Alpha.

This push to move from a supermajority to simple majority vote came after shareholder activists, led by John Chevedden, got the proposal on the ballot at eBay’s recent annual meeting of shareholders. If you follow the link to the official SEC filing of eBay’s proxy statement, you’ll see that the company opposed the proposal. eBay shareholders, however, voted in favor of it, prompting the eBay board to adopt the proposal just two months after it held the meeting.

This move by eBay puts considerable pressure on Netflix (NFLX)… Netflix notes it “will consider” ratifying the proposal ” in due course.” Like an online auction, the clock is ticking.

via Will Netflix Follow eBay’s Lead in Heeding Its Shareholders? – Seeking Alpha, June 29, 2011.

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Biogen Idec (BIIB): How I Voted

Biogen Idec (BIIB) is one of the stocks in my portfolio. Their annual meeting is coming up June 2. ProxyDemocracy.org had five funds voting.

Checking the Summary Compensation Table, it appears former CEO/Chairman James C. Mullen was paid more than $20 million and current CEO George A. Scangos was paid $9.4 million.  Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against most pay packages where the company paid more than the median $9 million last year. I also voted against Robert W. Pangia (Chair), Alexander J. Denner, Eric K. Rowinsky, and Lynn Schenk, since they served on the compensation committee.  I voted for a pay advisory every year and in favor of declassifying the board, a management proposal.

The 2011 Annual Shareholder Meeting will be webcast live on Thursday, June 2, 2011 at 9:00 a.m. ET. To access the live webcast, please visit Biogen Idec’s Investor Relations section (investor.biogenidec.com). An archived version of the webcast will be available following the meeting.

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How I Voted: Home Depot

Home Depot (HD) is one of the stocks in my portfolio. Their annual meeting is coming up June 2. ProxyDemocracy.org had five funds voting.

Checking the Summary Compensation Table, it appears CEO/Chair Francis S. Blake was paid about $10.5 million. Using the United States Proxy Exchange (USPX) released draft guidelines, I am voting against most pay packages over the median for large-caps of $9 million, including this one. I also voted against all members of the compensation committee: Brenneman, Codina and Hill.

I voted in favor of the proposal by Evelyn Y. Davis for cumulative voting. This right could become increasingly important is shareowners are ever given proxy access. I voted in favor of William Steiner’s proposal to allow special meetings to be called by 15% of the shares. I’ve introduced similar proposals and see this as simple good governance.

Similarly, I favor the proposal by Trillium Asset Management for a diversity report. Home Depot should take a leadership position on this important issue. I also favor the proposal from NorthStar Asset Management Funded Pension Plan to allow a shareowner vote on specified political expenses. After Citizens United, I think such votes at every company are warranted.

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Google: How I Voted

Google (GOOG) is one of the stocks in my portfolio.  Their annual meeting is coming up June 2. ProxyDemocracy.org had several funds voting. Although I reviewed how they voted, my votes didn’t align with any of the funds.

Checking the Summary Compensation Table, it appears two senior vice presidents (Patrick Pichette and Nikesh Arora) each got more than $22.5 million last year. That’s too much, even for Google, when the median large cap CEO is getting a little more than $9 million. Using the United States Proxy Exchange (USPX) released draft guidelines, I voted against the pay package, against the stock plan and against L. John Doerr and Paul S. Otellini, since they served on the compensation committee. Management wanted a say-when-on-pay frequency of three years but I voted for every year.

Turning to shareowner proposals, I voted in favor of John Harrington’s bylaw to establish a Sustainability Committee. Although Google is doing more than many companies, I think soliciting public input and issuing periodic reports to shareholders and the public, as requested in the proposal, would put Google farther ahead in this important area. I also voted in favor of John Chevedden’s proposal that each shareowner voting requirement impacting our company, that calls for a greater than simple majority vote, be changed to a majority of the votes cast for and against the proposal in compliance with applicable laws. I submitted similar proposals at other companies and see this as good governance to avoid entrenchment.

I voted against the proposal by the National Center for Public Policy Research to report on possible conflicts of interest. Although the proposal sounds good, I think this is the same group that has encouraged companies to account for lobbying costs to support cap and trade programs, so I don’t trust them.

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InGovern Proxy Analysis Launched in India

A new proxy vote analysis service, InGovern Corporate Governance Platform, allows institutional investors to analyze various companies, follow the agendas of shareholder meetings, exercise votes and collaborate with other investors. Research based on “objective criteria” – Governance Radar – is also embedded into the platform, according to a press release from Bangalore.

This is a part of InGovern’s pioneering efforts at promoting shareholder activism among institutional investors in India.

Global research has shown that there is high correlation between good corporate governance and long term returns on an investment. Shareholder activism is in its infancy in India. The Ministry of Corporate Affairs and SEBI have been prodding institutional investors to exercise their rights as minority shareholders in companies. Investors can hope to get superior investment returns by actively participating in enhancing the corporate governance culture in India.


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IRobot: How I Voted

IRobot (IRBT) is one of the stocks in my portfolio. Their annual meeting is coming up May 24. ProxyDemocracy.org had only one fund voting, CBIS, when I voted yesterday. MoxyVote.com had none. Today is the last day to vote using MoxyVote.com.

Checking the Summary Compensation Table, it appears CEO/Chair Colin M. Angle was paid more than $2.3 million, which is more than the $2.2 million median for a small-cap firm.  Using the United States Proxy Exchange (USPX) released draft guidelines and adjusting for company size, I voted against the pay package. However, because the difference was relatively small, I didn’t vote against the compensation committee. Management wanted a say-when-on-pay frequency of three years but I voted for every year. I voted using the MoxyVote.com platform.

1.1 Elect Director Gail Deegan For
1.2 Elect Director Andrea Giesser For
1.3 Elect Director Jacques S. Gansler, Ph.D. For
2 Approve Executive Incentive Bonus Plan For
3 Ratify Auditors For
4 Advisory Vote to Ratify Named Executive Officers’ Compensation Against
5 Advisory Vote on Say on Pay Frequency One Year


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How To Steal a Corporate Election

http://glynholton.com/wp-content/uploads/2011/04/vif.jpgThere are plenty of ways to steal an election. Some require guns. Others depend on bribes. Perhaps the simplest involve misleading ballots. For its corporate election this year, American Tower Corporation (AMT) has produced a humdinger. Item 04 of their ballot (technically a VIF; I will explain this legal nicety some other time) gives shareowners the option of voting “for,” “against” or “abstain” for the following:


In years past, shareowners have placed similar “say-on-pay” items on other corporations’ ballots. These tended to garner strong support as shareowners, concerned about lavish executive compensation, sought an opportunity to weigh in. But last year’s Dodd-Frank financial reform act mandated say-on-pay votes at all public corporations. So why Continue Reading →

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How I Voted at BP & Why I Vote on MoxyVote

BP, one of the stocks in my portfolio of about 50 companies, has an Apr 14, 2011 Annual Meeting coming up. I pulled up the “proxy statement” but didn’t have much patience with it… couldn’t easily find pay package, etc… perhaps because not US company. I checked in with ProxyDemocracy.org and MoxyVote.com… last day to vote using MoxyVote!

At ProxyDemocracy I see that Trillium voted against management on just about everything. I’m not quite that rebellious. I went with Florida SBA and CBIS, taking the harder line against management whenever they differed.

MoxyVote had recommendations from three groups but it is a little more difficult to compare them on that site since you have to click on each to get their recommendations, unless they are on your list of good causes. It looks like “Diversity” is asking people to vote against the only Continue Reading →

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MoxyVote.com Adds Advocates

Right in the middle of proxy season, we are thrilled to welcome a few new Advocates on the site.  Here’s the rookie lineup straight from MoxyVote’s blog:

  • Bill Davis is an independent shareholder activist who works to address corporate governance issues and increase shareholder involvement. Davis was recently nominated for a lifetime achievement award by the Social Investment Organization for his shareholder engagement and advocacy efforts. Be sure to read his resolution at Canadian Imperial Bank of Commerce (CM).
  • NorthStar Asset Management, a Boston based SRI asset management firm, files and supports shareholder resolutions focused on corporate governance practices, corporate environmental policies, and diversity and anti-discrimination efforts within the workplace. Be sure to check out their human rights resolution at Ecolab (ECL).
  • The Center for Social Philanthropy (C-SocPhil) provides innovative research, resources, and tools to encourage long-term social and environmental philanthropic impact. They’re supporting shareholder resolutions to encourage individuals and larger organizations to vote for initiatives that support their socially responsible outlook.
  • FreedomWorks is headquartered in Washington, DC and works with hundreds of thousands of grassroots volunteers nationwide. Through their volunteer activist network, FreedomWorks engages in activities that promote individual liberty through decreased government involvement and corporate initiative. Be sure to check out their opinions for resolutions on the Duke (DUK), General Electric (GE), and Pfizer (PFE) ballots.
  • PAX World Investments has several mutual funds geared toward SRI and ESG investing. Through their proxy voting and advocacy efforts, PAX World supports shareholder initiatives focused on corporate social responsibility and sustainability efforts. Keep an eye out for future ballots with PAX World’s vote recommendations.

Florida SBA has also been added to the mix at MoxyVote and that’s critically important because they are the 4th largest public pension fund in the United States and they own a little bit of thousands of companies. Now, when you turn to MoxyVote for voting advice they won’t just have one advocate’s position on one issue on your ballot. You’ll also get voting advice on directors and corporate sponsored measures at most of the companies you might own.

I’m glad to see the growing lineup. Please keep in mind, if you don’t find the advice you need on MoxyVote, you can always go to ProxyDemocracy.org to find more advice from institutional investors. Then you can come back and vote with Moxy.


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How I Voted at Apple

There was never any question in voting my shares of Apple. Egan-Jones Proxy Services, Glass, Lewis & Co. LLC, and ISS Proxy Advisory Services all endorsed a majority vote election standard proposed by CalPERS for unopposed board candidates. Who wouldn’t? If shareowners can’t make the nominations, they should at least be able to turn out directors who fail to represent us. The management of Apple insists that one vote in favor of a director should be enough to get elected. That doesn’t seem reasonable to me.

I also voted in favor of the Laborers’ International Union’s measure to have directors issue an annual report on CEO succession planning. Certainly, with Jobs getting a liver transplant in 2009 and talking another medical leave, it is high time the Apple board gave serious thought to succession plans.

Ten resolutions on succession planning have been submitted so far this proxy season and I’ll be supporting all I can vote for.  I’m a little surprised to see only CalPERS reporting out their votes on Apple at ProxyDemocracy.org. CalPERS also reported their votes on their site, the first of at least 300 this proxy season. If we’re lucky, maybe they’ll start reporting in advance for all their proxy votes.

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Don’t Toss That Proxy! Learn From CalPERS

Resolution MB 8/09, approved at CSEA’s last General Council, sought to expand on the leadership CalPERS has shown in the area of corporate governance by exploring how CalPERS could better influence the proxy voting of its own members and in helping us to evaluate which mutual funds vote in alignment with our own values and those of CalPERS.

In response to our request, CalPERS will be dramatically increasing the number of proxy votes they announce in advance in order to influence how we vote in corporate elections. This increased communication will be a two-way street. As members become more aware of how CalPERS votes, we may also have recommendations as to how they should vote. I would be happy to hear from CSEA members and other organizations that represent CalPERS members in that regard. Continue Reading →

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Shareowners Speak Louder in 2011

Passive or apathetic investors, take vote [note] : Now your votes  have actually begun to mean something. More so than ever, shareholders can truly feel like they’re part owners of public companies.

That makes now the perfect time for a push for better corporate governance policies. As it turns out, large institutional shareholders are striking while the iron’s hot this year. (In 2011, Shareholders Speak Louder Than Ever, Fool.com, 1/26/2011). See also: Don’t Toss that Proxy.

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How I Voted at Hain, Cisco & Accuray

I waited too long to vote on the MoxyVote.com platform. However, even waiting until the day before the meeting, I was still only able to get minimal advice. I hearty thanks goes out to CalSTRS and their cooperation with ProxyDemocracy.org. At least they had announced votes for Hain and Accuray as I cast my votes this morning.

At Hain, I voted down the line with CalSTRS, withholding votes from director nominees Berke, Futterman and Meltzer, as well as voting against the long-term stock plan proposed by management. At Accuray, I would have voted with CalSTRS and management. However, the ProxyVote platform wouldn’t accept the control number provided to me by my broker. With all the proxy plumbing issues mentioned in the SEC’s concept release, I guess I shouldn’t be too surprised with this glitch. I contacted my broker. We’ll see how quickly they can resolve this.

Since not even CalPERS had announced votes at Cisco, I was on my own. I voted abstain on all the director nominees and other measures except that I voted in favor of the shareowner resolution on environmental sustainability reporting and steps to reduce possible human rights violations. Just as an experiment, I left one field blank to see if Broadridge had addressed the blank vote issue. They had not. After voting, a second page comes up asking to confirm my vote. At the top of that page, in very small print obscured by the gray background the following note appeared.  “*No vote entered.  Your vote will be cast as recommended by the soliciting committee.” And there was a small asterisk next to the vote I left blank.

Obviously, there is much work to be done to improve proxy voting. Here in voting three stocks, I was only able to obtain voting advice on two. On one of the stocks I ran into a proxy plumbing issue. I also confirmed that blank votes are still being turned over to management with only the most obscure warning. For more about that issue, see Don’t Let Companies Change Shareholders’ Blank Votes, HLS Forum on Corporate Governance and Financial Regulation.

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E-Mail from Lynn Turner on Proxy Access

An email from Lynn Turner below and frequent emails this morning from Tracey Rembert highlight key provisions we are in danger of losing, in the broader fight for shareowner rights and corporate governance. Elected officials need to hear from all of us about how important these provisions are, especially proxy access. Corporations are lobbying hard in an 11th hour push. Proxy access is in DIRE danger, as are many reform provisions. Please take five minutes and pick up the phone or draft an email (see posts below for who to contact). If we lose these key fights, we lose years of momentum. See also, Senate Conferees Vote to Restrict Proxy Access, RiskMetrics, 6/17/10.

Here’s the email from former SEC Chief Account, Lynn E. Turner:

Today was a very, very good day for Wall Street and Big Business in the halls of congress and a very, very poor day for Main Street and Investors.  Developments in the House/Senate Conference that occurred today include:

Investors Ability to Hold Corporate Executives and Boards Accountable are eliminated or seriously watered down by Senators and White House


The bills adopted previously by both the House and Senate would give the SEC the authority to adopt rules that would give investors equal access to the annual proxy with management for purposes of nominating directors.  The SEC has proposed rules that would give investors that had a threshold of the company’s stock the ability to nominate directors.  It was generally expected that threshold would end up a 3%.  Even at that threshold, it would be difficult for enough investors to pool their holdings together to nominate as a group, a director.  Also the SEC would likely limit how many directors in a year could be nominated.

However, today Senator Dodd has proposed language that would effectively prohibit shareholders from having proxy access in a tremendous blow to any attempts to hold corporate boards accountable for their actions.  I understand that in reviewing the Dodd language more carefully, there appears to be an even more pernicious aspect:  the amendment strikes the reference in the current language to “shareholders” in the plural and substitutes “shareholder” in the singular and then goes on to impose the 5% ownership requirement on any SHAREHOLDER who seeks access to the proxy.  This seems to require that a group of shareholders seeking access to the proxy would have to EACH be a 5 percent shareholder.

This would completely gut the proxy access provision because there would be no single 5 percent shareholder for most corporations of any significant size, and thus the 5% ownership threshold would never be satisfied.  The SEC has always envisioned permitting a group of shareholders, such a public pension plans to aggregate their holdings in order to satisfy the minimum ownership threshold for proxy access.  The Dodd language appears to completely reverse that and would mean that for most large corporations proxy access would not be available to shareholders.

Just as an example, GE has no single shareholder with 5% or more in stock.  The top three shareholders, BlackRock, Vanguard and State Street each hold approx 3.4%.  There are three instititional investors that hold 1.1 to 1.2% of the stock.  After that, all shareholders own less than 1%.  In fact, the top 50 shareholders only own 32.8%.  That ensures no single shareholder could in fact “commandeer” and election as many in the business community have falsely argued.  And getting 50% of the vote for any single director candidate still requires substantial and WIDESPREAD support among investors.

Senator Schumer from NY and Representative Waters from California have been fighting very hard for investors on this issue and working to keep in the original proposal.  At the same time, I understand from a number of sources, that the White House and Treasury department are “carrying the water” for the business community, including the Business Round Table or its members on this issue.


In the Bill passed by the Senate,  there was language that required any candidate up for election to the board of a public company, to receive a majority of the votes cast, in order to win election (The same rules as apply to congressional elections and members of congress).  That is because today, investors can only vote for a director or withhold their vote, which is the equivalent of not voting, as the vote does not count in determining whether a director is elected.  In fact, a director receiving just one vote (even if their own vote) is elected according to what can only be considered very ridiculous and insane law.

I understand the Senate has now agreed to strip this language on majority voting which would have established democracy in the board room, out of any final bill.

Democrats (DURBIN, Inouye) Prevailing in Limiting SEC Necessary Resources.

For years, the SEC has had Congress put severe limitations on the resources made available to it.  To resolve this shortcoming contributing to a failure in regulation, the US Senate voted in its legislation to provide the SEC with Self Funding, Just as all the banking regulators have, as the new proposed consumer protection bureau has, as the regulator for credit unions and Freddie Mac and Fannie Mae have.

The members of the House agreed to self funding.  However, now in a bizarre twist of fate, two key Democrats, Senator Durbin and Inouye are once again attempting to strip this language from the bill, once again handcuffing the agency in a most serious fashion, and just as Congress is asking the SEC to do much, much more.  As a result, Senator Dodd has told Senator Schumer, who once again has been a tremendous champion for the SEC and investors on this issue, that he must strike some deal or accord with Durbin and Inouye and amend the language that these two senators previously voted for when they voted to approve the senate bill at the end of May. In the future, when the SEC comes up short of funds again as it most certainly will, and cannot carry out regulation as it should, one can only label it the “Durbin/Inouye” folly.

Congress considers Limiting SEC Regulation of Securities as it Limited Regulation of Derivatives

Some congressional members of the conference, such as Senator Harkin from Iowa and Senator Johnson from South Dakota, a home for Insurance companies, appear to be giving difference to members of the insurance industry who continue to press for inclusion in the conference report of anti-consumer legislation to exempt equity-indexed annuities from securities regulation.

Equity-indexed annuities are hybrid products that combine elements of both insurance and securities, but they are sold primarily as investments. Indeed, as documented in a seven-part Dateline NBC hidden camera expose, they are among the most abusively sold products on the market today. Responding to a rising level of complaints, the Securities and Exchange Commission voted in late 2008 to adopt rules regulating equity-indexed annuities as securities, a move that was immediately challenged in court by the insurance industry. In deciding the case, a U.S. Court of Appeals sided with the agency on the basic issue of whether equity-indexed annuities should be regulated as securities while remanding the rule with respect to procedural issues. Having failed to prevail in court, the insurance industry has turned to Congress to preempt legitimate securities regulation of this product and do their bidding.  The reasons this is so anti investor, anti consumer and anti Main Street includes:

Equity-indexed annuities are complex products whose returns fluctuate with performance of the securities markets. Absent regulation under securities laws, they can be sold by salespeople with no more understanding of the markets than the customer.

Although the National Association of Insurance Commissioners has developed a model suitability rule for annuity sales, it has not been adopted in all states. Regulation under securities laws would provide national uniformity, would bring to bear the added regulatory resources of the SEC, state securities regulators, and FINRA, and would provide additional investor protections in the form of improved disclosures and limits on excessive compensation.

Exempting equity-indexed annuities from securities regulation would set a dangerous precedent and encourage the development of additional hybrid products designed specifically to evade a more rigorous form of regulation.

This highly controversial measure which is opposed by consumer advocates as well as state and federal securities regulators was not included in either the House or the Senate bill and is not germane to the underlying legislation. To include it in the conference report would be a gross violation of the integrity of the legislative process.

Congress Exempts a large Group of Public Companies From Having to Ensure their Internal Controls will Produce Financial Statements Without Errors

In 2002, in light of hundreds of billions of dollars lost from corporate scandals such as Enron and Worldcom, resulting from false and misleading financial statements, members of congress passed a law that required ALL public companies to have their internal controls inspected by their independent auditors to ensure against misleading financial statements. That bill passed in the Senate by a 97-0 margin and in the House with all but three votes.

The House had passed a bill last December that would have exempted all public companies with under $75 million in market value, which includes companies such as Blockbuster and Zales, from having those inspections done. This despite investors time and time again telling congress and the SEC they were willing to bear these costs in order to get accurate financial statements. And also despite the fact there were almost 750 of these companies over the last year and a half who had to restate their financial statements for errors, the single large group of companies with such errors reported.

But in a reversal, the House told the Senate today they would not require that in the final legislation. In once again a bizarre twist, the Senate who did not have any such exemption or provision in its bill, voted to put it in. Led by Senator Crapo who introduced the language, and joined by two democratic senators, Senator Johnson from South Dakota and Lincoln from Arkansas, these senators got a permanent exemption put into what will be the final bill, giving an exemption to all these companies, which represent approximately half the public companies, and with over $375 billion in market value. And Senator Dodd today noted that the White House was once again behind this move as well.

Senators To Let Wall Street Get Away Car Drivers Get off

And finally, a couple of years ago, the Supreme Court Ruled that Securities Laws today, prohibit investors from suing someone who knowingly provides substantial assistance to someone who is committing a securities fraud, unless that person tells the investor they are doing so (as if anyone would do such a stupid thing). The court also said in their opinion that if congress wanted to change the law, it was up to congress to do so. At the time, both Representative Frank and Senator Dodd wrote letters vehemently condemning the ultimate decision the court reached.

The House, included language in their bill last December that would allow investors to recover from those who negligently or fraudulently assist others in the commission of securities fraud. In the Senate, Senators Specter and Reed and others proposed language that would all recover when it could be proven some knowingly or recklessly provided substantial assistance in the commission of a securities fraud.

Once again, the Senate, and I am told with Senators Dodd concurrence, are opposing the House on this issue and insisting that consistent with current law and the Supreme Court ruling, one can still knowingly provide substantial assistance to others in the commission of a securities fraud and avoid a shareholder lawsuit. One can only ask how condoning such behavior today, when over 100 million Americans have their savings invested in the markets, is REFORM.

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