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Corporate Governance

: The Race to the Bottom

ABA Business Law Section Spring Meeting: Shareholder Activism 2010 and Proxy Participation

By Joseph Aguilar

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This blog's coverage of the ABA Business Law Spring Section Meeting continues with a very interesting program entitled 'Proxy Solicitations and Shareholders' Meetings: Grit, Grids, and Other New Issues.' This was a very interesting panel, featuring board of director advisor/defense counsel, proxy solicitation firms, third party director recommendation firms, and even the SEC Director of the Division of Corporate Finance.

The panel discussed the uptick in shareholder activism as the economy recovers from the past two years. So far this proxy season there have been 766 shareholder proposals, already outpacing last year. Further, the 61 proxy contests this year outdid both 2008 and 2009. 'Vote No' campaigns are up as well, but without as much publicity as in the last two years.

Also of interest, the panelists discussed the continued struggle to get retail shareholders to exercise their voting powers. Although the SEC is considering some methods to increase access and awareness for retail shareholders, such methods like E-delivery of proxy materials seems to do little good. One presenter noted that his firm still uses paper delivery of proxy materials because the firm only saw a 7% response from E-delivery. One attendee of the conference, an attorney for Prudential, offered a creative and seemingly effective method to spur voting. In order to entice retail shareholders to vote (only 5% voted last proxy season), Prudential offered shareholders the 'gift' of a tree planted in their name or an eco-friendly bag if the shareholder voted. No where did the company ask the shareholder to vote for or against management's slate and the gift was of nominal value. Apparently the company has seen a big uptick in shareholder participation in the proxy voting process and even an increase in shareholders providing comments on directorial performance. The panel noted that France is considering similar strategies of offering 'rewards' for voting participation by retail shareholders.

Full post as published by The Race to the Bottom on April 24, 2010 (boomark / email).