Dear Chairman Cox,
In American Federation of State, County, and Municipal Employees Pension Plan v. AIG, the Second Circuit Court of Appeals asked the Securities and Exchange Commission to clarify its rules for the exclusion of shareholder proposals related to an election. In the process of clarifying the commission’s rules, we urge you to reject any measure that would allow shareholders to nominate their own directors in company proxy materials.
Forcing companies to let certain investors nominate directors on company proxies would let special interests gain seats on corporate boards and/or 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 shareholder 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 Kyoto-like carbon restrictions, to auto emissions standards, to prescription drug price controls, 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.
Dissident shareholders can and do mount proxy fights 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.
The listing standards for both NASDAQ and the NYSE already require that boards be composed of a majority of independent directors, who themselves comprise the search committee for new directors.
For these reasons we urge you to stand up to the special interest pressure pushing for shareholder access and allow existing state laws to govern director nomination and election.
Alabama Policy Institute
American Association of Small Property Owners
American Legislative Exchange Council
Alliance for Worker Freedom
American Shareholders Association
American Conservative Union
Americans for the Preservation of Liberty
Americans for Prosperity
Americans for Tax Reform
Andrew F. Quinlan
Center for Freedom and Prosperity
Vice President for Legislative Affairs
Christian Coalition of America
Terrence Scanlon President
Capital Research Center
Citizen Outreach Project
Council for Citizens Against Government Waste
Director, Center for Entrepreneurship
Competitive Enterprise Institute
Competitive Enterprise Institute
Chairman and CEO
Free Congress Foundation
Free Enterprise Action Fund
Director, Property Rights Coalition
Grassroot Institute of Hawaii
PresidentGrassroot Institute of Hawaii
Institute for Policy Innovation
Iowa Wednesday Group
National Alliance for Worker and Employer Rights
National Center for Public Policy Research
National Tax Limitation Committee
Population Research Institute
The Smith Center at California State University
cc: Commissioner Paul Atkins
Commissioner Roel Campos
Commissioner Kathleen Casey
Commissioner Annette Nazareth