Proxy Access: Now We Are Four

Spread the love

First, we learned that Daniel Rudewicz, a USPX member, filed a proposal at KSW, a Long Island City, N.Y.-based company with a $19.7 million market capitalization that furnishes and installs heating, ventilating, and air conditioning systems and process piping systems.

Rudewicz’s binding proposal calls for investors to hold at least a 2% stake for one year to be eligible to nominate director candidates for inclusion in the corporate proxy materials.

There was some negotiation between the parties and KSW filed a bylaw amendment that has the appearance of providing proxy acces but actually disenfranchises shareowners from rights they already had. KSW then filed a no-action letter to keep Rudewicz’s proposal off the proxy.

Rudewicz objected that management’s bylaws weren’t equivalent. Then KSW amended their bylaws again to at least actually allow proxy access, but at substantially higher thresholds than those sought by Rudewicz.

Will the SEC grant no-action relief? I certainly hope not.

A second case involves the Princeton National Bancorp, Inc (PNBC), where David Monier reports that his access proposal, which utilized model USPX language, will be included on the proxy.

Monier will also be nominating Steve Bonucci from the floor of the annual meeting, so there is a real opportunity for change at this bank where the stock price has dropped from more than $10 in 2010 to less than $1.50.

The third case involves a much larger company,  Hewlett-Packard. As reported yesterday in the WSJ, investors who own at least 3% of H-P shares for at least three years would be allowed to nominate up to 20% of the company’s directors under a binding bylaw proposal that will appear on the proxy in 2013 as a result of a negotiated withdrawal of a proposal with similar thresholds filed by Amalgamated Bank’s LongView Fund.

I loved this quote in WSJ from Charles Elson, head of the Weinberg Center for Corporate Governance at University of Delaware’s business school. H-P’s move represents

a recognition by a significant company that proxy access has potential merit and number two, that the shareholder resolution probably would have passed without management support.

The thresholds set far too high a bar but it certainly represents a step in the right direction. This comes on top of two directors announcing they will step down. Big changes ahead for H-P.

Finally, there is the previously reported case of Western Union, which received a binding bylaws proposal from Norges Bank with thresholds of 1% held for 1 year. Western Union submitted a no-action letter to the SEC seeking exclusion of Norges Bank’s proposal pursuant to Rule 14a-8(i)(9) because the proposal directly conflicts with a proposal to be submitted by Western Union at the annual meeting.  Management’s proposal includes thresholds of 5% held for three years. At this point, I’m not sure if Norges is contesting the no-action request.

I don’t think there would be any “confusion” if both items appear on the proxy. Whichever gets the most votes should be implemented.  I would hate to see proxy access follow the same script we have seen for special meeting proposals where it appears shareowners have to fight for every percentage point year after year.

Congratulations to Daniel Rudewicz and Dave Monier, as well as Cornish Hitchcock and Scott Zdrazil working with the Amalgamated Bank and the LongView Fund for their pioneering efforts. And a special thanks to Anne Kvam and others at Norges Bank for bringing the huge clout of their $550 billion fund to the party and for proposing far lower thresholds than most institutional investors.