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Key22 The irate sharehoder: annual ruckus

In the Vietnam War era, protestors often bought a share or two of Dow Chemical to use the 13as a forum to address Napalm, the war and general corporate decadence. While the causes have changed, shareholders still have their insurgent rights.

Under SEC regulations, shareholders have the right to submit proposals to be included in the proxy materials for vote at the annual meeting (年度會議). These proposals are limited to 200 words and give the insurgents the right to speak at the annual meeting (年度會議) in support of their proposed action.

Types of shareholder proposals include requirements that directors own shares in the company, limitations on executive compensation and even procedural issues such as the timing of the annual meeting (年度會議) or release of the annual reports (年度報告). The most common types of resolutions for 1999 annual meetings (年度會議) were:

• Executive compensation
• Staggered boards (proposals for both starting the practice and ending it)
• Cumulative voting proposals
• Independent director majority requirements
• Confidential proxy voting (代理選舉)

(For an ongoing tally of the types of shareholder proposals, see www.socialfunds.com)

Other shareholder proposals are more concerned with social issues. For example, Cracker Barrel Cheese had a shareholder proposal to require the company not to discriminate against homosexual employees. Iroquois Brand Foods had a shareholder proposal that would have prevented the company from force-feeding geese and then rubber-banding their necks to increase the size of their livers to produce more paté.

Shareholder proposals have covered everything from doing business in South Africa to human rights in China. Electric utilities with nuclear plants face proposals to shut them down; consumer products companies are asked to stop testing their products on animals.

The shareholder proposal is often a focal point for political and social activism in which the company is only a convenient foil. While the SEC has the ability to exclude shareholder proposals as being beyond a corporate purpose, they have not taken an active role in vetoing proposals because even social causes can have an indirect impact on the company’s bottom line. Board members should be prepared to discuss and address these issues prior to the annual meeting (年度會議) where the shareholders will have the chance to present their proposals and urge adoption.