It soon will be moment-of-truth time for Christopher Cox, chairman of the U.S. Securities & Exchange Commission, regarding one of the most fundamental issues in shareholder rights.
So far, Cox has dodged the issue which has been festering for five years. It involves allowing shareholders to propose changes in corporate bylaws covering the election of directors. Company managements have fought for years to keep a stranglehold on this very issue because the status quo allows them to control their boards. Doing so raises a basic question: who owns and controls the companies, the shareholders or the C-Suite?
The SEC got a nudge to do something in 2006 when a federal appeals court in New York overruled a lower court’s decision that the pension plan of the American Federation of Federal, State, County and Municipal Employees (AFSCME) could not get rules changed when it wanted to push its own director candidates at insurer American International Group.
But Cox dillied and dallied for more than a year because his commission was badly split on the issue. Late last year, the matter came to a head when Cox suddenly pressed for a vote when one of two Democratic commissioners, Roel Campos, had resigned and his seat was vacant. Cox and the two Republicans on the commissioner, Paul Atkins and Kathleen Casey, voted management’s way to nix any such rule changes.
Ever the politician, Cox said this vote was only temporary because there wasn’t a full complement of commissioners. Well, there is now. The Senate has confirmed Democrats Luis Aquilar and Elisse Walker along with Republican Troy Paredes to fill the current vacancies on the commission.
Cox has said he’ll step down as chairman next February. Will he revisit this vital issue before he’s history as chairman? He’s got a full board to do so. Stay tuned because the impacts are huge either way this issue goes.
