New Rule Makes It Easier For Shareholders To Usurp Board Members

As of yesterday’s 3-2 SEC ruling, the little guy just got a little more power in the boardroom. When shareholders want to nominate people to the board, the company now has to include those names on the regular ballots passed out to everyone before the annual meeting, even if the company doesn’t like them.

Before, shareholders had to mail out separate ballots and conduct a their own campaign, both of which are pretty expensive. Not surprisingly, there are some folks pretty ticked off about the new “proxy access” rule, which two previous SEC chairman tried and failed to pass, and they’re already sharpening their long knives.

Investors Gain New Clout [WSJ]

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  1. jecowa says:

    Wht s th cnsmr ss hr?

    • bendee says:

      It means that when shareholders recognize that customers are angry, it’s much easier to oust the current head honchos.

      But judging how you typed the post, you’re just a troll.

      • jecowa says:

        ws prtctng myslf frm dsnvwlmnt

        • Loias supports harsher punishments against corporations says:

          If you know you have to protect yourself, it probably means you shouldn’t speak to begin with.

      • Loias supports harsher punishments against corporations says:

        I still flagged him. Hopefully he’ll just get banned from posting entirely.

      • jecowa says:

        So if a ceo runs a company into the ground and uses bailout money to throw a party, the shareholders can fire the CEO?

        • TheRedSeven says:

          Well, it’s usually more complicated than that.

          The shareholders elect a board of directors, who then have hiring power for CEO (and often many of the other C-level executives).

          When a group of shareholders wants to change the strategy of the company, one of the ways they attempt to do this is to either a) influence the Board to hire a new CEO, or b) replace board members with people who will do their bidding. Only then can the Board fire the old CEO and hire a new CEO.

          Often, this is because a group is trying to do a hostile takeover, or wants to gain value for their shareholdings by selling parts of the company/its assets.

          It’s all very politically intriguing, I assure you.

    • TheRedSeven says:

      Viciating the disemvoweler. Clever girl.

  2. Skankingmike says:

    oh wow, that means Fred Smith could be outed as CEO? It’s been tried for years now, pro unions will run wild on this.

  3. Warren - aka The Piddler on the Roof says:

    This seems like good news, at least on the surface. Let’s see how it pans out. If I understand it correctly, all the shareholders need to do (if they don’t already) is initiate an instant notification e-newsletter that keep everyone up to speed on what’s going on within the company, including new nominees. This could be an excellent way to control who’s running the show, their salaries, executive spending, golden parachutes and the like. Bravo, says I!

  4. tasselhoff76 says:

    Note that to win the right to nominate, an investor or group of investors must own at least 3% of a company’s stock and have held the shares for a minimum of three years.

  5. SideshowCrono says:

    This actually does next to nothing for us ‘little guys.’ As it has been stated previously on the board, you have to own 3% and have had owned it for a few years. It’s mainly just a power grab for insitutional investors and pension funds.

    So, in the end, it’ll just be some OTHER faceless organization making our decisions for us. Sweet!

    • CyGuy says:

      FYI – Pension Funds ARE the little guys. Whose pensions do you think they’re managing? Mostly teachers, police, fireman, and union members.

      So while I may not be able to nominate folks to a board, someone managing a large chunk of my savings will be able to.

      • flyingember says:

        and now these pension groups can push a condition of staying with a specific fund to get someone nominated who’s pro to their corporate beliefs.

        The biggies are going to be the Union pensions as mentioned. I expect the UAW leadership is pushing this right now.

      • SideshowCrono says:

        Pensions, managing billions, are not little guys and do not share the same objectives as small investors.

        And I certainly do not want unions mucking up corporate governance as they have a strong bias towards higher wages and benefits. That aside, I understand that some corporations should have their boards shaken up and their CEOs outed but… I wouldn’t invest my own money in such an enterprise. I only buy stock in companies where I believe in management and I would certainly trust management a whole lot more than some pension fund that is looking for a good quarter for their holdings.

        I’m all for shareholder activism but I just don’t see how this helps me or any other true ‘small investor.’

    • dreamcatcher2 says:

      There are certainly some investors/funds that make a business of identifying companies with waste at the top levels, buy a bunch of stock, and try to influence the board to implement more reasonable. The problem is that this is a really hard and risky type of investment. Today, companies can erect all sorts of barriers to prevent shareholders from exerting an influence, from the bylaws of the board (small executive subcommittees controlled by insiders that can act on behalf of the whole board, staggered elections, all sorts of tricks) to the hurdles to jump through to get somebody on the board.

      At least we are now removing one barrier. It’s a small step – a really small step – but such an important one.

  6. Firethorn says:

    When they say ‘the little guy’, take it with a grain of salt. Just heard about this on NPR.

    Basically, in order to nominate somebody you have to have been holding at least 3% of the company’s stock for a minimum of 3 years.

    For example, the market cap for AT&T(picked out of a hat) is 158 Billion. You’d need 4.8B in stock to get to put your own candidate forward.

    Sears would be cheaper – 7.24B market cap means you’d only need 218M in stock for 3 years to put your own candidate forward.

  7. Harry_Greek says:

    The ‘lowly’ power hungry can now satisfy their appeitite.

    The little guy? Continues being collateral damage in such power struggles.

  8. peebozi says:

    this is outrageous?!?! there goes the free market economy we have embraced!

  9. Tombo says:

    >And I certainly do not want unions mucking up corporate governance as they have a strong bias towards higher wages and benefits.

    Those evil bastards!