Eight leading U.S. and international pension funds, owning more than $300 billion in U.S. stocks, urged federal regulators today to withdraw a proposed take-away of shareowners’ use of corporate ballots to nominate directors.
Funds joined by the Council of Institutional Investors, which has more than $3 trillion in member assets, issued the appeal at a news conference and in letters to Chairman Christopher Cox of the Securities and Exchange Commission.
“We are assembling to highlight what we believe is the specter of a serious wrong turn,” said Fred Buenrostro, Chief Executive Officer of the California Public Employees’ Retirement System (CalPERS). “The SEC’s major customers – pension funds that invest billions and billions of dollars in U.S. capital markets – are dead serious in opposing this action. We see it in direct conflict with the duties of the SEC to ‘do no harm’ to investors in promulgating regulations.”
Citing “uncertainty” in the market, Chairman Christopher Cox has proposed an SEC vote soon on two proposals, one of which would allow companies to keep shareowner proposals related to director elections off proxy ballots.
Today, investors asked the SEC to shelve two proxy access proposals for the 2008 proxy season until the Commission has a full complement of five commissioners to address the issue. One commissioner has left the SEC. Another plans to leave soon.
“There is no reason for the Commission to act at this time,” said Meredith Miller, Assistant Treasurer for Policy, Connecticut Retirement Plans and Trust Funds. “The sky has not fallen and the markets are working. And while the vast majority of corporate boards are doing a good job, there are some boards that are failing their shareholders. In those cases, it would be useful and good for shareholder value for shareholders to have an effective tool to at least nominate a few new directors on those boards. Access to the proxy is that tool.”
Meredith Williams, Executive Director of the Colorado Public Employees’ Retirement Association, warned: “The contemplated action by the Commission will dramatically disenfranchise the world community of investors. Taking a step backward now hardly seems like a logical route to moving forward. The detrimental effect of implementing a flawed proposal would far outweigh a perceived benefit from an immediate resolution.”
Williams said an SEC rush to judgment would give global investors “clear evidence that they are denied rights as a shareholder through U.S. markets that are commonly provided and recognized in other markets worldwide.” Dr. Daniel Summerfield, Co-head of Responsibility Investment from Great Britain’s Universities Superannuation Scheme, agreed, saying:
“It’s critical that U.S. policy-makers understand that this (SEC action) has ramifications for how overseas investors view the integrity of U.S. markets.” He said experience in countries that allow proxy access has shown that the rarely-used tool has played a key role in aligning corporate boards with shareowners' interests while, rather than destabilizing companies, has led to more constructive dialogue between companies and investors."
Bess Joffe, Manager, Hermes Equity Ownership, a $915 billion fund in the UK, said: “The lack of access to proxy puts shareholders in U.S. corporations at a competitive disadvantage vis-à-vis other jurisdictions in which they hold shares. If the rights of shareholders in U.S. companies are enhanced by providing any or all of these rights, including access to proxy, shareholders will quickly learn how to exercise them critically and responsibly, which is the case in other jurisdictions where these rights exist.”
Jack Ehnes, Chair of the Council of Institutional Investors and Chief Executive Officer of the California State Teachers’ Retirement System, said proposals before the SEC would take away “a fundamental shareowner right.”
“Politics should not be part of a regulatory process,” he said. “And any effort to make a decision now without a full bipartisan complement of commissioners is actually sending a message to investors that politics do matter. Naturally, we stand ready to work with the SEC and provide input on any proposals, but we must not run backwards out of a fear of an illusory uncertainty. We are at a critical point in the history of shareholder rights. Demonstrating leadership and protecting the rights of shareowners is paramount, and we are highly concerned about the direction that we see this heading. We’re asking the commission to stop and listen to the world’s shareholders.”
The full text of the pension funds’ letters to the SEC can be found in the CalPERS Press Room at www.calpers.ca.gov and on the funds’ Web sites.
