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Proxy Advisors Obstruct Proxy Access

August 9, 2012 in General

The good news is that, on the second round of submissions of the USPX model proxy access proposal, the SEC rejected all no-action requests. We now have votes coming up in the next couple months at Forest Labs ($FRX), Medtronic ($MDT) and H&R Block ($HRB). All three were submtted by individual shareowner Kenneth Steiner.

The bad news is that the proxy advisory firms ISS and Glass Lewis are now standing in the way. Jim McRitchie, John Chevedden and Glyn Holton have been doing outreach to the proxy advisors and institutional investors … but we pretty much have to get support from influential ISS, or we won’t receive majority votes.

A couple weeks ago, USPX members finalized a slide presentation on the USPX Model Proxy Access Proposal. We forwarded it to ISS, and they agreed to have a conference call. It was a cordial conversation. We walked them through the careful logic behind the model proposal, as described in the release document. They listened and asked questions … and several times made a disturbing protest to the effect that some of their clients disagreed with our position that proxy access should be open to smaller investors, including individual shareowners. They didn’t exactly explain why those clients disagreed. All that mattered was that … they disagreed.

Through back channels, we later heard:

ISS is not recommending a yes vote. They said their clients are expressing support for a higher threshold of stock ownership than ISS expected. Plus their clients wanted more change in control safeguards.

ISS has come out against our proposal at Forest Labs and Medtronics. They haven’t yet taken a position on the H&R Block proposal, which is slightly different from the other two. it blocks takeover attempts by capping the number of shareowner nominees at 48% of the board—precisely the sort of change in control safeguard ISS found lacking in the other two proposals. We will wait and see what they decide.

The response from Glass Lewis has been even worse: they refused to even speak to us. Proxy access is the biggest issue in shareowner proposals this year, and our model proposal has been submitted to more companies than all other proxy access proposals combined, and they wouldn’t even speak to us …

Updated Model Proxy Access Proposal

March 23, 2012 in Standards

Two weeks after SEC lawyers granted six corporations approval to exclude “proxy access” proposals from their proxy materials, USPX members are already submitting an updated version of that same proposal to other corporations. Updated language addresses the flimsy pretexts for the lawyers’ decision, as well as implementing improvements to the proposal language that shareowners have recommended.

The original proposals were based on a USPX model proxy access proposal released on November 10, 2011. Today, the USPX announces an update to that model proposal, which shareowners can submit to corporations. Shareowner Kenneth Steiner received an advance copy of the update, and he has already submitted proposals based on the new language to Medtronics (MDT) and Forest Labs (FRX).

The purpose of the model proposal is to facilitate board nominations, not only by the largest institutional shareowners, but by all shareowners, including individual investors. The updated model proposal has two alternative versions. Version A is a direct evolution of the original model. Version B is based on a customization of the model, developed by shareowners Jim McRitchie and Glyn Holton for submission to Dell Corporation (DELL).

By limiting the number of proxy access nominations to less than a majority of board seats, the second version provides a strong safeguard against proxy access being used to pursue a change in control at a corporation. While Version A also seeks to avoid change in control issues, it does so primarily by prohibiting coordination of nominating groups, not by restricting the total number of shareowner nominees.

A 16 page release document presents the text of both versions followed by instructions for submission, background information and the history of proxy access. A section provides a detailed explanation of Version A. A shorter section follows that to explain how Version B differs from Version A.

Shareowners are encouraged to submit a version of the model proposal to corporations they think would benefit from it. We also encourage shareowners to experiment with modifications and/or to submit entirely different proxy access proposals of their own design and to let us know of those modifications or different proposals.

We welcome feedback, which can be posted directly on this page (log-in as a USPX member to do so) or send an e-mail at jm@corpgov.net.

Reuters Spotlights the USPX

February 9, 2011 in General

Glyn Holton and Norman the cat.

Yesterday, Ross Kerber of Reuters wrote a wonderful piece describing the USPX. It focuses on Glyn Holton and one of our less-known members: Norman the cat. You can read the article here.