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SEC Hurrying Rule To Curb Shareholder Rights

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By MARCY GORDON, The Associated Press

Published: November 15, 2007

WASHINGTON - With only one Democrat now on the Securities and Exchange Commission, a proposal allowing companies to bar shareholder moves to open board elections appears headed for adoption in two weeks.
Senate Democrats recommended Wednesday that the White House nominate Luis Aguilar, the former general counsel of investment management firm Invesco PLC, and Elisse Walter, who was a securities industry regulator to fill two Democratic vacancies on the five-member SEC. One Democrat left in September and the other is expected to depart in the coming months.
Shareholder activists and corporate governance advocates told Congress that the likely SEC approval of the proposal on Nov. 28 would everely curtail investors' rights.

Governance advocates also said the SEC, with three GOP members, should fill the Democratic vacancies before voting on a rule that would let companies prohibit shareholders from demanding open corporate-board elections.

"A decision of this importance warrants the attention of a full" SEC, Dennis Johnson, of the California Public Employees Retirement System, said at Wednesday's Senate Banking Committee hearing.

Democrats have known since midsummer at least that the issue was on the front burner and did not send candidates to the White House until now. Even an expedited vetting and approval process for nominees would take more than two weeks.

Republican Christopher Cox, the SEC's chairman, however, says he wants shareholder-rights rules enacted before the 2008 proxy season begins.

Generating more than 20,000 public comment letters to the SEC, the shareholder rights issue is one of the most controversial to come before the financial markets watchdog agency in at least two years. The public comment period ended Oct. 2.

If the proposal is adopted, as appears likely, it "would shut shareowners out of the most important and democratic governance process at their companies," Johnson said. "There is no compelling reason for this rush to judgment."

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