Shareholders challenge board elections

Some U.S. shareholders in major corporations are attempting to gain more power than they have ever had in the election of members to companies’ boards of directors.

These activists claim that this power is necessary in order to hold boards responsible for their actions in order to avoid scandals like the one that led to the downfall of Enron.

Business leaders were able to stop shareholders from effecting reform at the federal level, retaining most of the power for appointing board members to themselves, as present rules allow board members to be appointed after receiving even just one vote from a shareholder.

Holding out little hope that the Securities and Exchange Commission will act on the issue, shareholders are now attempting to change corporate rules at the state level.

Delaware, the state where over half of the large companies in the U.S. are incorporated, however, will wait for the American Bar Association to study the matter and make recommendations before they act.

Because the ABA will take at least a year to study the issue, action in Delaware is more than a year a way. Things will likely not progress any faster in the other states, with the U.S. Chamber of Commerce, the Business Roundtable, joining business executives in opposing the proposed changes.

However, some entities, such as US state pensions funds are being asked to support the initiative and companies like Caterpillar and Rayethon are either planning on putting resolutions on the issue to a vote at their annual meetings or are pursuing compromise resolutions with the activist shareholders.