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Groups Want Delay Of Shareholder Rule

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By MARCY GORDON, The Associated Press

Published: November 20, 2007

WASHINGTON - Twelve big pension funds and a government workers' union are making last-ditch efforts to persuade securities regulators not to adopt a controversial shareholder rights rule before month's end.

On Monday, officials of 12 of the biggest public pension funds explained in a conference call with reporters why it's a good idea to make it easier and more affordable for shareholders to elect candidates they back to a company's board.

Separately, the American Federation of State, County and Municipal Employees, or AFSCME, said it will sue the Securities and Exchange Commission if a less expansive rule is approved on Nov. 28, as expected.

"We're prepared to litigate," Richard Ferlauto, AFSCME's director of pension and benefits policy, said in a telephone interview Monday. "I'm assuming that we'd have other major investors that would come in, in one form or another," on any litigation, he added.

The rule proposal is one of the most talked-about to come before the SEC in at least two years, made more so by the vacancy of a seat on the commission that has been held by a Democrat who would presumably vote for the proposal giving shareholders easier and cheaper access to the proxy process.

When the SEC asked for public comment in July, more than 34,000 letters were sent in before the comment period ended Oct. 2.

The 12 pension funds - including the nation's largest, the California Public Employees' Retirement System - together own more than $300 billion worth of stocks in U.S. companies. Their officials wouldn't comment on possible litigation Monday, but they said the funds had sent "urgent letters" to the SEC chairman, Christopher Cox, a Republican, pressing him to delay the expected Nov. 28 vote until all five seats on the SEC are filled.

The pension funds "are dead serious in opposing this action," said CalPERS chief executive Fred Buenrostro. The move would be "in direct conflict with the duties of the SEC" to protect investors, he said.

The funds also included the California State Teachers' Retirement System, Colorado Public Employees Retirement Association, Connecticut State Employees Retirement System, Washington State Investment Board and five New York City public employee funds.

The pension funds and governance advocates say that the SEC, with three sitting Republican members, should fill at least one of the two anticipated vacancies - a second Democrat is leaving in a few months - before voting on the rule change.

Typically, the five-member panel of presidential appointees has three Republicans and two Democrats, in keeping with the custom of having no more than three members of the party that controls the White House.

However, the Democrats have known for months that the vote might come up before year-end and just sent recommendations for filling SEC vacancies to the White House last week.

Cox has said that he wants new shareholder-rights rules in place before the 2008 proxy season begins next spring.

In testimony to Congress last week, Cox said the SEC must dispel legal uncertainty surrounding the issue.

However, in September, a federal appeals court challenged the SEC's decision to allow insurance giant American International Group to bar AFSCME's proxy-access proposal.

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