Proxy Access

“This is our highest priority,” said John Castellani, president of the Business Roundtable, which represents 170 chief executives. “Literally all of our members have called about this.” Last week alone, Castellani said, 40 chief executives were in town visiting Capitol Hill about [the proposal]. Concern cuts across industry lines. Steve Odland of Office Depot, Ivan Seidenberg of Verizon and Jim McNerney of Boeing have all been in Washington arguing against the provision. So has Ursula Burns of Xerox, who is the vice chairman of President Obama’s Export Council and a longtime supporter of his. Obama supports [the proposal].

So what key policy has CEOs so fired up? Obamacare? Taxes? Immigration? Cap & Trade? Troops Abroad? No, proxy access:

Businesses far from Wall Street have intensified their efforts to kill a largely overshadowed provision of the Senate’s financial regulation bill giving shareholders more ammunition to shake up corporate boards. … With proxy access, shareholders would be able to send a strong message to management if they weren’t happy with a company’s strategy, for instance, in managing risk or charting growth. On the other side, public companies fear that proxy access will mainly invite activist investors and hedge funds to infiltrate boards and topple existing management — whether out of displeasure with how a company is run or to pave the way for a hostile takeover.

The end result, corporate executives warn, is that board directors will feel constant pressure to juice up their company’s stock price and put short-term considerations ahead of the firm’s long-term health. … Under current law, if shareholders want to nominate their own board directors, they must pay for publicizing candidates and mailing ballots, which can cost millions of dollars. Critics say this discourages shareholders from making the effort. Proxy access would force companies to foot the bill for outside nominees. …

“We talk about shareholder democracy, but what we really mean is activist hedge funds and state-pension-fund democracy,” she said. “There’s really no evidence this is going to benefit long-term diversified investors, which means the rest of us.” ¬†Supporters of proxy access counter that institutional investors are just as interested in the long term as everyday, 401(k) investors. And any board nominee would still have to be approved by a majority of shareholders.

As I said in January:

Apparently we must protect over-paid CEOs because they are our heroic public-spirited defenders of the little guy against greedy shareholders. Where oh where would little folks be if not for protection from CEOs? Oh, please! CEOs?!

More evidence that we defer to almost-transparently self-serving authorities more often than we like to admit to ourselves.

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