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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 …

An Open Letter to Institutional Shareholder Services (ISS)

November 4, 2011 in General

November 4, 2011



Global Policy Board
Institutional Shareholder Services Inc.
2099 Gaither Road
Rockville, Maryland 20850

Re: ISS 2012 Proxy Voting Policies – Proxy Access Proposals (US)

Dear Sir or Madam:

Thank you for this opportunity to comment as you develop policies for making shareowner voting recommendations in 2012. This letter addresses policies with regard to Rule 14a-8 proxy access proposals.

After twenty years of obstructing shareowner efforts to achieve proxy access, the SEC finally released Rule 14a-11. While ostensibly providing proxy access at public corporations, it was anti-democratic. Two particularly objectionable aspects of the rule were:

  1. A high ownership threshold of 3% of a corporation’s outstanding stock in order to nominate. This disenfranchised all individual shareowners and all but the very largest of institutional shareowners, at least at medium or large corporations.
  2. A hard cap on the total number of shareowner nominations was set equal to 25% of the number of board members, which ensured Rule 14a-11 would never have more than token impact.

The courts may have their own reasons for vacating Rule 14a-11, but we agree with their conclusion that the rule could be seen as “arbitrary and capricious.”

While we object to Rule 14a-11, we applaud the SEC for amendments to Rule 14a-8 to allow shareowners to submit their own proposals for alternative—and presumably better—forms of proxy access at individual corporations. This “private ordering” approach to proxy access would allow shareowners to experiment with different approaches to proxy access at individual firms, to see what worked.

Now that Rule 14a-11 has been vacated, prospects for private ordering experimentation are dimming. Large institutional investors that intend to submit proxy access proposals appear poised to base those proposals on Rule 14a-11, incorporating the two anti-democratic aspect of that rule, which I have already mentioned.

In formulating a policy for making voting recommendations with regard to proxy access, we encourage you to make voting recommendations as if Rule 14a-11 were never vacated. If that were the case, Rule 14a-11 would be a minimal baseline already applicable at all corporations, and the purpose of proxy access proposals would be to experiment with innovative alternatives. We see no reason that should change just because Rule 14a-11 was vacated. Vacated or not, Rule 14a-11 was a bad rule, and shareowners need to innovate and experiment with alternatives, implemented through the Rule 14a-8 proposal process, to find a means of proxy access that works.

The United States Proxy Exchange (USPX) is developing a model proxy access proposal. This will provide a reasonable—but not necessarily easy—means for most long-term shareowners to participate in nominating directors. It will impose no hard cap on the total number of shareowner proposals, although it will provide safeguards that obstruct parties seeking a change of control through proxy access.

We will encourage shareowners to submit our model proposal or to use it as a starting point to develop their own proposals. We hope that shareowners will also submit completely different proposals of their own design. The success of proxy access depends on experimentation to find what works. This entails risk, of course. Democracy always does. The USPX intends to fully support the process, and we hope ISS will too.

We will forward our model proxy access proposal to you when it is complete.


Glyn A. Holton
Executive Director

cc:  Laura Berry, ICCR
Michael Garland, Change To Win
Brandon Rees, AFL-CIO
Michael Ring, SEIU
Anne Sheehan, CalSTRS
Anne Simpson, CalPERS
Ann Yerger, CII
Michael Zucker, AFSCME

An Important E-mail YOU Can Send To facilitate Proxy Access

November 3, 2011 in General

Can you write an e-mail to Institutional Shareholder Services (ISS)? It will take you two minutes, and doing so could have an enormous impact on proxy access proposals in 2012.

A hard-working team of USPX members are drafting a model proxy access proposal that members can submit to corporations for the 2012 proxy season. Here is the latest draft. It is critical that this proposal win majority votes at the corporations to which it is submitted, but for that to happen, proxy advisory firms need to support the proposal. WE NEED TO MAKE A CASE TO THEM THAT THEY SHOULD SUPPORT IT.

The biggest proxy advisory firm, ISS, is requesting shareowner feedback on what their internal policies for making voting recommendations should be for 2012. Anyone is welcome to respond. It is easy to provide feedback. Below is a sample note you can send. Please cut and paste it into an e-mail. Edit the non-bold portions to make the e-mail your own. Add your full name at the bottom, and include an appropriate subject at the top, such as “Comments on 2012 Policies”. Then e-mail it to ISS at Please send a copy to us at, so we can post it to the website. For more information, see the ISS website.

The deadline for commenting is November 7. Please don’t wait. Send your e-mail now.

Here is the sample e-mail you can send:

Dear ISS:

Thank you for the opportunity to comment for your 2012 Draft Policies. I respond below to the questions you posed relating to Proxy Access Proposals (U.S). You may list my affiliation as “member, United States Proxy Exchange”.

Q: Does your organization intend to generally support or oppose proxy access shareholder proposals? Would your organization’s view differ based on whether the proposal is a binding bylaw resolution versus a precatory (non-binding) one? If so, how?

A: I personally will generally support both binding and nonbinding proxy access proposals that afford a reasonable—but not necessarily easy—means available to all long-term shareowners to nominate.

Q: If your organization is likely to take a Case-by-Case approach on proxy access shareholder proposals, are there any additional factors not enumerated in ISS’ proposed policy that your organization believes are central to the evaluation of these proposals? If yes, please specify.

A: I will generally oppose proposals that I consider to be blatantly undemocratic. Specifically, I would oppose high ownership thresholds, which would disenfranchise all but the largest institutional shareowners. I would also oppose caps on the number of shareowner nominees, especially caps designed to ensure that a majority of board seats are retained by the current board’s nominees.

Q: Would your organization look for specific thresholds or limits when evaluating these shareholder proposals (e.g., a minimum or maximum ownership percentage or number of board seats)? If yes, what specific parameters does your organization favor?

A: By asking what sorts of thresholds or limits respondents might support, this question fails to recognize that innovative proposals using mechanisms other than the “thresholds” and “limits” or Rule 14a-11 might deserve support. As a member of the United States Proxy Exchange (USPX), I know my organization is preparing a model proxy access proposal that includes a number of sound innovations. One of these, as the draft is currently written, would allow a group of 100 shareowners, all satisfying the Rule 14a-8 eligibility requirements, to place one nominee on the proxy. The USPX model proposal has not yet been released. When it is, I hope ISS will review it carefully and choose to recommend supporting votes for it.

Q: Would your organization oppose the shareholder proposal if it allowed 13D filers seeking a change in control to place candidates on ballots? If no, please explain.

A: I would not want any party simultaneously performing an independent proxy solicitation AND nominating under proxy access.

Thank you,