This Week in ESG and Impact Investing

After hearing from a few people, let me clarify: 1. The purpose of the SEC may be to protect investors, but on April 28, 2003 , every major US investment bank was found to have aided and abetted efforts to defraud investors. Ethical problems have continued and grown worse: since late 2006, 182 major U.S. lending operations have "imploded" due to subprime lending issues. Most people losing their homes are low to moderate income people of color. This is no accident. Those with new ideas and solutions to the problem have been carefully excluded from the discussion, due to the same bigotry that gave rise to it. This, too, is no accident. We do not mean to sound cynical. We see what is, not what we would like to see. 2. The real issue is Hedge Funds, nothing else. In our comments to the SEC on the matter, we noted: "Any significant concern about proxy access rests with hedge funds, by their nature neither long term investors or sensitive to broader social concerns. The s...

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 Portfolio.com, "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.

On July 27th, the SEC posted two Shareholder Access proposals. Commenters have 60 days to reply: Shareholder Proposals Relating to the Election of Directors. No.: IC-27914. File No.: S7-17-07. Comments Due: Comments should be received 60 days after Federal Register publication.--> Submit comments on S7-17-07 Shareholder Proposals. Release No.: IC-27913. File No.: S7-16-07. Comments Due: Comments should be received 60 days after Federal Register publication.--> Submit comments on S7-16-07

As we indicated they would, the SEC put forward a proposal that would eliminate or severely restrict shareholder access to the corporate proxy statement. The Agency also put forward a proposal to expand shareholder access to the proxy. We believe trepidation about the leak of the restrictive proxy access proposal ( SEC Proxy-Access Proposal Draws Fire from Investors. The Wall Street Journal. By JUDITH BURNS. July 11, 2007; Page D2 ) led to concerns about a possible due process lawsuit. In an inspired move, the Agency decided to simultaneously release a second, less restrictive proposal. This action negates concerns about the early and selective distribution of proposed public policies only to moneyed interest groups and simultaneously provides a way to optimize shareholder access and proxy policy.

The SEC has announced it will soon issue revised rules governing the conditions under which shareholders have the right to file resolutions. This follows a recent set of discussions, including a Roundtable on Proposals of Shareholders held at SEC HQ on May 25 th . We believe the SEC will limit shareholder rights. We do not believe they will eliminate shareholder access to the proxy outright. Rather, we expect the Commission to impose a number of rules that virtually eliminate shareholders’ ability to file resolutions. These may include a 5% ownership rule or unreasonably restrictive time limits governing the filing of resolutions. We believe the SEC will offer shareholders improved communications and access to corporate management via on-line tools, like bulletin boards or “chat rooms.” Having done so, they will claim to have improved shareholder access. Unless , as we suggested earlier , these boards or chat rooms reside on SEC servers, they will be wrong. We base our opinion on se...