Show Your Support for Director Accountability

Recent corporate scandals, such as corporate spying at Hewlett-Packard and the stock options backdating scandal at UnitedHealth Group, and, more broadly, excessive executive pay highlight the need for strong and independent boards of directors to oversee management and prevent such abuses.

The director election process for U.S. corporations has historically been dominated by management. Shareholders vote only on candidates nominated by the directors themselves, a practice that allows CEOs to handpick their own directors.

In 2006, the federal courts gave all investors a real right to raise issues about director elections through the shareholder proposal process. This process provided shareholders the possibility of nominating their own directors and requiring companies to include these nominees on the company’s proxy ballot (proxy access), potentially ending the self-perpetuating system that permits incumbent boards to handpick director candidates. 
 
Unfortunately, the U.S. Securities and Exchange Commission (SEC) proposed rules in July of 2007 that would effectively eliminate these gains. Furthermore, one of the proposed rules raises the question of eliminating the right to file most shareholder proposals entirely. The SEC must prevent this from occurring and protect shareholders’ rights by rejecting these proposed rules.

Use the form on the right to contact the SEC.

Sample Letter for Campaign

Subject: File Number S7-17-07

Dear [ Decision Maker ] ,

It is important that long-term shareholders are able to nominate and elect truly independent directors, in order to hold boards of directors accountable for their actions. The federal courts last year gave all investors a real right to raise issues about director elections through the shareholder proposal process.

Corporate scandals, such as corporate spying at Hewlett-Packard and the stock options backdating scandal at UnitedHealth Group, and, more broadly, excessive executive pay highlight the need for strong and independent boards of directors to oversee management and prevent such abuses.

In general, the right to file shareholder proposals is a critical investor protection, particularly for small investors like me whose retirement savings are invested in public companies.

However, both of the U.S. Securities and Exchange Commission's (SEC's) recently proposed rules (File No. S7-16-07 and S7-17-07) would eliminate these gains and roll back my rights as a small investor. It seems that some commissioners want to take away my right to file most shareholder proposals entirely.

I urge the SEC to prevent this from occurring and to protect my rights as a shareholder by rejecting both of its proposed rules regarding shareholder resolutions related to the election of directors.

Sincerely,

Campaign Launched:
September 12, 2007


Background Information

It is important that long-term shareholders are able to nominate and elect truly independent directors to hold boards of directors accountable for their actions.

Recent corporate scandals, such as corporate spying at Hewlett-Packard and the stock options backdating scandal at UnitedHealth Group, and, more broadly, excessive executive pay highlight the need for strong and independent boards of directors to oversee management and prevent such abuses.
 
The director election process at U.S. corporations has historically been dominated by management. Shareholders vote only on candidates nominated by the directors themselves, a practice that allows CEOs to handpick their own directors.
 
State laws allow shareholders to nominate their own directors, but for even the largest institutional investors, this is not a realistic option. The high cost of launching proxy contests to oust directors means shareholders could do little more than rubber-stamp a company’s nominees. 

However, the federal courts last year gave all investors a real right to raise issues about director elections through the shareholder proposal process. This process provided shareholders the possibility of nominating their own directors and requiring companies to include these nominees on the company’s proxy ballot (proxy access), potentially ending the self-perpetuating system that permits incumbent boards to handpick director candidates. 
 
Unfortunately, the SEC proposed rules in July that would effectively eliminate these gains. Furthermore, one of the proposed rules raises the question of eliminating the right to file most shareholder proposals entirely.

The SEC must prevent this from occurring and protect shareholders’ rights by rejecting these proposed rules regarding shareholder resolutions related to the election of directors.