Dodd-Corker Fed Bill May Contain Left-Wing "Shareholder" Power Grab
17 Center-Right Groups Object to "Proxy Access" Provision Empowering Unions, Other Progressives
Washington, D.C., March 3, 2010 – Today, the media is reporting the outlines of a compromise "financial reform" bill from Bob Corker (R-Tenn.) and Senate Banking Committee Chairman Chris Dodd (D-Conn.) that would greatly expand the powers of the Federal Reserve to regulate consumer products. A broad spectrum of conservative and free-market groups has expressed concern that the bill’s "shareholder jujitsu" provisions would empower Big Labor and other activists on the Left in the name of helping shareholders.
Leaders of 17 groups representing a broad spectrum of the center-right coalition — from CEI and Americans for Tax Reform to the Christian Coalition of America – recently sent a letter to members of the Senate Banking Committee objecting to "proxy access" provisions of the discussion draft of Dodd’s financial regulation bill.
"Proxy access" would federalize state incorporation law and force a public company to subsidize the campaigns of small groups of shareholders’ nominees for the company’s own board of directors. The letter contends that this would help special interest shareholders such as union pension funds and left-leaning foundations and work at the expense of the bottom-line interests of ordinary shareholders.
"Through pension funds, labor unions and other anti-market interest groups have significant stakes in major corporations as well as entrepreneurial new firms," the letter explains. "A proxy access rule would allow them and other activists to achieve through the board nomination process what they have been unable to accomplish through the political process."
The center-right leaders argue that activist groups could use the threat of a board nomination — which a company would have to subsidize — as a lever to force companies to bow to political demands such as union "card check" that would end secret ballot for union elections, cap-and-trade, and even Fairness Doctrine-type silencing of "politically incorrect" media personalities.
John Berlau, Director of CEI’s Center for Investors and Entrepreneurs and a signatory on the letter, also wrote in a new article in BigGovernment.com that the concept of "proxy access" has its origins in radical community organizer Saul Alinsky’s "proxy tactic." In his "Rules for Radicals," Alinsky conceded that this tactic of using proxies to promote the Left’s agenda "will result in diminished dividends" for middle-class investors, but said that it was necessary to fool the middle class to "build power for change."
Berlau concluded that "if Democrats and/or compromising Republicans attempt to push through proxy access or any other form of Alinsky’s shareholder jujitsu, they may face an army of opposition from middle-class investors and entrepreneurs who know the principles of freedom that made this country great."
Text of letter opposing "proxy access" shareholder jujitsu:
February 25, 2010
Dear Chairman Dodd and Ranking Member Shelby:
As groups representing millions of Americans that comprise a center-right coalition, we are writing to oppose provisions mandating “proxy access” in the discussion draft of Chairman Dodd’s “Restoring American Financial Stability Act of 2009.”
“Proxy access” – forcing companies to subsidize the director campaigns of certain shareholder nominees – would benefit special interests with political agendas at the expense of ordinary shareholders. Groups with political motivations could also use the threat of director nomination to push through agendas that advance their own political interests but destroy shareholder value.
Through pension funds, labor unions and other anti-market interest groups have significant stakes in major corporations as well as entrepreneurial new firms. A proxy access rule would allow them and other activists to achieve through the board nomination process what they have been unable to accomplish through the political process.
Unions would use this leverage to win card check and neutrality agreements, allowing them to unionize companies without secret ballot elections. They could also put pressure not only on the companies they have stakes in but also their partners and suppliers.
The implications go far beyond unions. Everything on the anti-market political wish list from cap-and-trade carbon restrictions, to animal rights activism, to interfering with defense contractors to advance foreign policy objectives would be possible. These initiatives, whatever their merits, belong in the political arena, not in corporate boardrooms where the focus should be on maximizing shareholder value.
Special-interest shareholders of media companies would also have a wedge to demand the firing of “politically incorrect” personalities, chilling policy debate.
The provisions also breach longstanding traditions of federalism. For more than 150 years, director elections have been governed exclusively by the states. Dissident shareholders can and do mount proxy fights under current rules to challenge company-nominated slates of directors, but they do so by distributing their own proxy materials at their own expense. This helps to encourage nominations of directors dedicated to improving the bottom line for all shareholders, rather than promoting the interests of a specific group.
For these reasons we urge you to stand up to the special interest pressure pushing for proxy access, strip these provisions from the bill, and allow existing state laws to govern director nomination and election.
Jim Backlin, Vice President of Legislation, Christian Coalition of America
John Berlau, Director, Center for Investors and Entrepreneurs, Competitive Enterprise Institute
Andresen Blom, Executive Director, American Principles Project
David Bossie, President, Citizens United
Susan Carleson, Chairman and CEO, American Civil Rights Union*
Richard Falknor, Chairman, Maryland Center-Right Coalition
William Greene, President, RightMarch.com
Aloysius Hogan, Director of Government Relations, English First
Andrew Langer, President, Institute for Liberty
Colin Hanna, President, Let Freedom Ring
Jim Martin, Chairman, 60 Plus Association
Grover Norquist, President, Americans for Tax Reform
Dick Patten, President, American Family Business Institute
Tim Phillips, President, Americans for Prosperity
Don Racheter, President, Iowa Association of Scholars
Jack Wheeler, President, Freedom Research Foundation
Mark Williamson, President, Federal Intercessors
* Group listed for identification purposes only
The Honorable Robert Corker