Showing posts with label ICCR. Show all posts
Showing posts with label ICCR. Show all posts

Monday, November 26, 2012

Exit, Stage Left

Gary Brouse, ICCR and Mary Schapiro, SEC.
SEC Open Meeting, 2011.  Photo by William Michael Cunningham.
We note, with more than a little regret, Mary Schapiro's exit from the Securities and Exchange Commission. How her departure will impact the Dodd/Frank Section 342 initiative and Crowdfunding is unclear.

She was in a tough and thankless job. In her favor, she did save the Agency. The question is, save it for what? Will it take the more aggressive stance required to repair the financial system? It seemed to be moving in that direction.

My concerns with the Agency are well known, but Ms. Schapiro was cordial and professional every time I met her.

I thank her for her service and wish her well.

Tuesday, October 9, 2007

Response to SEC Shareholder Proposals

On October 8th, we filed our response to the following SEC proposed rules:

1. Shareholder Proposals. Other Release No.: IC-27913. File No.: S7-16-07 and
2. Shareholder Proposals Relating to the Election of Directors. Other Release No.: IC-27914. File No.: S7-17-07.

In our response, we note the following:

  • Our position with respect to capital markets regulation recognizes the primacy of protecting investors. Investor interests, broadly speaking, are not served by growing levels of fraud and malfeasance. As is clear from recent events, securities laws have failed both to protect investors and to promote efficiency. “Facilitating the exercise of shareholders’ rights” will help prevent fraud from occurring.
  • We recognize that the right to submit shareholder resolutions impacting corporate operations, governance and ownership has economic value, like any option. This option value was first uncovered by faith based investors, who found their ability to implement positive social change diminished as the social order moved to a market-based culture. Submitting shareholder resolutions allowed them to move with the social order. This strategy has been co-opted by certain hedge funds, now using the practice for selfish, potentially destructive purposes.
  • Any significant concerns about expanding proxy access rests with these hedge funds, by their nature neither long term investors or sensitive to broader social concerns. We suggest the SEC permit hedge funds to make their proxy voting records public, as mutual funds are required to do. To incentivize this suggestion, the Commission should rule that those hedge funds choosing not to make their proxy voting records public forfeit any legal right to file shareholder resolutions.
  • The 5% ownership threshold proposed in File Number S7-16-07 and S7-17-07 should be much lower. The threshold should tie to length of ownership. For owners holding the stock over 10 years, there should be a nominal requirement based on number of shares held, say, 100 shares, and a pledge to hold onto the stock for another 10 years. For five year holders, there should be a 1,000 share requirement, and a pledge to hold onto the stock for another 5 years. For one year holders, there should be a 10,000 share requirement.
  • The 5% ownership threshold is equivalent to a “poll tax,” effectively disenfranchising large groups of investors. Fraud in the marketplace (detailed in our comments) mandates that options for exercising shareholder rights be enhanced, not diminished.
  • The exercise of voting rights without an economic interest in the underlying security should be disallowed. This is an administrative anachronism created by the fact that publically traded companies do not register individuals as owners of their shares.
  • Any person serving on any corporate board signs a binding contract to act as a fiduciary. This means putting the interests of all shareholders first, so, legally, there are no “special interest directors.”[1] Having an interest in and advocating for a long term issue of perceived future significance to a corporation need not be inconsistent with competent board service.
  • We believe the reference to “states rights” is code for an attitude that supports the resistance of certain entrenched corporate interests to the rights of outside shareholders who are not part of management. Federal law should dominate, given that state law failed to stop the fraud and malfeasance noted.

  • The fundamental problem is the continuing and legal disenfranchisement of the majority of shareholders. To fully address the proxy access issue means first addressing two regulatory loopholes: those that allow hedge funds to operate without supervision and those that allow publically traded companies to avoid registering individuals as owners of their shares.
We continue to believe that efforts to block these rule changes will be ineffective. We suggested a coalition-based approach to this issue in 2004, in a presentation at SRI In The Rockies, a social investing conference. Unfortunately, social investing groups are not immune from the same bigoted and exclusionary tendencies that impact society at large. For these groups to wait until 2007 to create the coalition we suggested is, in our opinion, simply too little, too late.

[1] In fact, if there are any “special interest directors” currently serving on corporate boards, they are those whose sole interest is self enrichment at the expense of other shareholders.

Thursday, September 13, 2007

New Math at the SEC

As we noted on August 10th, turmoil at the SEC means that paths to an optimized shareholder access and proxy policy, while then still present, are fewer in number. We continue to believe the SEC will limit shareholder rights. A 9/12/07 article in the Washington Post supports this belief. Thus, we are now almost certain that the restrictive shareholder access proposal we discussed on July 20th will be adopted.

According to, "The Social Investment Forum, the Interfaith Center on Corporate Responsibility and Ceres, a coalition of investors, environmental groups and others, unveiled a new web site to attract 500 institutions and financial professionals to sign a joint statement against proposed S.E.C. changes."

For a number of reasons, these efforts will probably be ineffective.