sec shareholders corporate management publicly-traded

The move is a long time coming
wall street reform board of directors

SEC gives shareholders power to nominate directors

Here’s a bit of good news, a gift for you on the birthday of Henry George (in 1837 on Sept 2), proto geonomist whose magnus opus, Progress and Poverty, outsold every book of his era but the Bible. He spent his life working for economic justice and grassroots democracy. Shifting the balance of power within corporations is a step in that direction. Among other benefits, some day we might rein in outrageous CEO salaries and pay stockholders fatter dividends. This 2010 article is from, Aug 25.

by Jennifer Liberto, senior writer

The Securities and Exchange Commission on Wednesday voted to make it easier for shareholders to have a bigger say on corporate leadership at publicly-traded companies.

The new rule, which came about as a result of Wall Street reform, will allow shareholders who own 3% of company stock for at least three years to nominate candidates for director on the annual proxy ballot, which gets sent to shareholders for a vote.

"Long-term, significant shareholders should have a means of nominating candidates to the boards of the companies that they own," said SEC chairwoman Mary Schapiro.

The idea is to make it easier for shareholders to shape corporate leadership, with an eye toward holding corporate boards more accountable for decisions like rewarding executives who make risky bets.

The SEC voted 3 to 2 in favor of the new rule. One SEC commissioner said the move is a long time coming. "For far too long, shareholders have been shut out of the nominating and election process," Commissioner Elisse B. Walter said. "It is also a matter of principle to facilitate individual shareholder rights."

Currently, a company's existing board of directors effectively controls which director candidates are placed on the ballot that is sent to shareholders.

The rule would limit the number of potential shareholder board nominees to 25% of a company's board or 1 board director, whichever is greater.

The rules would mostly impact board of director elections starting in 2011. The SEC will give smaller companies a reprieve, as smaller publicly-traded companies won't have to abide by the new rule for three years.

The commission puts some speedbumps in place to stop shareholders from gaming the new rule. For instance, it bars shareholders from borrowing stock to hit the threshold for nominating directors.

Several Senate Republicans wrote SEC Chairwoman Schapiro to note that the new Wall Street reform law didn't "mandate" the SEC to create new rules governing proxy access.

Ten Senate Republicans, including Sen. Richard Shelby, R-Ala., who opposed the reforms, signed a letter that urged the Commission to be careful not to put up roadblocks for companies.

Those who oppose the move argue it will pressure companies to focus on shorter term results and empower shareholders with parochial agendas.

David Hirschmann, president and CEO of the U.S. Chamber's Center for Capital Markets Competitiveness, called the move "special interest-driven." He warned that labor union pension funds would use it to "ram through their agenda."

JJS: Arguing against democracy in any size group from a business to all society seems to me so antediluvian. Whose money is it, anyway? Even if the new rule would hinder what corporate managers now get a way with and help pensions, unions, and others influence management, could it be any worse?

A pay ratio of 500 to 1 between CEOs and employees? What officers, managers, and directors now do with the assets of the corporation -- which is the property of all the stockholders, not of management -- is borderline criminal, white-collar crime. They raid the treasury and income stream with impunity.

Part of the problem is their, if not theft at least self-enrichment, is so abstract, it’s hard for outsiders to be aware of, much less understand, what’s going on. Since this obscurity and complexity is our downfall, a simpler system could work all to the better.

In this regard, the Georgist system could help. We’d replace the myriad of taxes on the values that people create with fees and dues that charge people for the values they take. That is, you’d not pay taxes on earnings or sales or your building but be charged for your pollution, the resources you use, and the land you exclude others from (as is everyone’s right).

In this system, corporations would not be able to retain the natural rents that make them so unduly rich. Without that unearned income, they could not easily afford to spend millions lobbying for favors ("rent-seeking” in the jargon). They’d get less corporate welfare and they’d face stricter standards to protect worker, consumer, and nature.

Landowners, having to pay land dues (or taxes), would put their under-used sites to good use. The resultant economic activity would increase employment and raise wages while the land dues themselves would drive down the price of land. Thus workers would enjoy more income and less outgo, so they’d have more clout in dealing with management.

Employees and stockholders would enjoy a more level playing field even without getting a Citizens Dividend from surplus rental revenue. But in a complete geonomy, would we even have this conversation about corporate power and their abuse of power? More likely, we’d celebrate Henry George’s birthday with a bash that lasted until Labor(less) Day!


Editor Jeffery J. Smith runs the Forum on Geonomics.

Also see:

Greek debt, Merrill Lynch buyout, & Killer Pills are Rip-off

Congress Can't Get the Fed to Reveal Much

High Frequency Trading

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