Funds push for board votes

Led by California's two giant public pension funds, a coalition of major U.S. and international institutional investors Monday launched a last-ditch campaign to scuttle proposed federal rules on corporate board elections.

With only one Democrat left on the five-member Securities and Exchange Commission, pension fund officials fear the panel in the coming weeks will adopt a proposal that would let companies bar shareholders from nominating their own candidates for the corporate board.

The move, backed by influential business groups, would roll back a federal appeals court ruling last year that opened up board elections.

SEC Chairman Christopher Cox "stands poised to move ahead with a proposal. To do so would create a legacy of destroying shareholder rights," said Fred Buenrostro, chief executive of the California Public Employees' Retirement System, during a telephone news conference.

CalPERS, the nation's largest public fund with more than $250 billion in assets, and the $176 billion California State Teachers' Retirement System joined six other U.S. and United Kingdom pension funds urging the SEC to postpone a decision on access to the corporate proxy. Together, these funds own $300 billion in U.S. public equities.

For years, public and union pension funds have waged campaigns to increase shareholder influence on corporate elections, saying the current rules force investors to launch costly outside proxy campaigns to put up their own slate of candidates.

Shareholder activists are concerned the commission's three Republican members will press ahead for adoption. Roel Campos, a Democrat, resigned from the SEC in September and the other Democratic commissioner, Annette Nazareth, plans to leave in a few months. The funds want regulators to wait until the commission vacancies are filled.

But last week, Cox told a Senate committee he wanted to enact a new shareholder rights measure before the 2008 proxy season.

The issue has generated enormous interest on Wall Street after a federal appeals court ruling opened the way for investors to nominate their own directors.

Rather than embrace the court stand, the SEC in July introduced two competing proposals:

• Allow shareholders who have held at least a 5 percent ownership stake for a year to nominate candidates.

• Keep the status quo and permit companies to maintain control of board elections.

"These proposals offer no meaningful shareholder access and should be rejected by the commission," said CalSTRS chief executive Jack Ehnes.

Since the summer, the SEC has received more than 20,000 public comment letters.

The powerful U.S. Chamber of Commerce has led the lobbying against changes. The organization says the 5 percent ownership proposal would lead to corporate boards overly influenced by unions and special interests.

But pension officials say most European countries allow shareholders to nominate candidates with little evidence of political upheaval at companies.

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