CEOs Fight Making It Easier
For Holders to Stop Board Picks

By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
May 27, 2005; Page C4

Trying to blunt a union-led corporate-governance initiative, the Business Roundtable is launching a campaign to oppose shareholder proposals that would make it easier for investors to reject nominees for corporate boards.

The Business Roundtable, composed of chief executives of 160 major corporations, is alarmed by proposals requiring nominees to get the affirmative vote of the majority of shares cast. In most corporations today, shareholders can vote for a nominee or withhold a vote, but the nominee is elected as long as a single vote is cast in his or her favor -- no matter how many votes are withheld.

In a letter to an American Bar Association task force and reviewed by The Wall Street Journal, the Roundtable warned of possible complications of endorsing the change, including shareholder confusion, higher proxy-solicitation costs and increased difficulty in recruiting qualified directors. It also expressed concern about the voting changes increasing "the power of special interests to advance narrowly focused or single-issue viewpoints that may not reflect long-term shareholder value."

The ABA Business Law Section's committee on corporate laws recently established a task force to examine whether to recommend changes to state laws that govern the process of electing directors.

E. Norman Veasey of Weil, Gotshal & Manges, chairman of the ABA task force, told the Roundtable in a letter, "It is premature to make any public disclosures on the merits of the committee's deliberations" and promised to consult the Roundtable sometime after the committee meets in early June.

A number of building-trades unions, led by the United Brotherhood of Carpenters and Joiners of America, have submitted such nonbinding resolutions this year to more than 80 companies. The effort has met with success at several companies, including Advanced Micro Devices Inc., Altera Corp. and Marathon Oil Corp. Resolutions were narrowly defeated at Citigroup Inc., Caterpillar Inc. and Gannett Inc.

About a dozen major companies -- Intel Corp., ChevronTexaco Corp., Gap Inc. and J.P. Morgan Chase & Co., among them -- agreed to explore the issue with union fund activists.

Thomas Lehner, the Roundtable's policy adviser, says that his group is recommending a set of principles that urge companies to give holders a greater voice, including having procedures for holders to communicate with boards and ensuring that boards respond to all proposals submitted by holders.

Write to Michael Schroeder at mike.schroeder@wsj.com1

 

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