US shareholders aim for greater controls
April 4, 2005
U.S. business leaders are trying to turn back an attempt by some shareholders to gain more power in the naming of board members to large companies boards of directors. The business executives, supported by such organizations as the U.S. Chamber of Commerce and the Business Roundtable, are determined to keep the power to name board members to themselves.Shareholders say that giving them more power in the matter will make boards of directors more accountable for their actions and perhaps avoid scandals like that which destroyed Enron. Executives currently have virtual carte blanche to name board members, as voting rules state that a board member can be appointed with only one vote from a shareholder. The Securities and Exchange Commission has not moved to change the rules on the federal level, so shareholders have turned to state rules to try to effect reform there. The American Bar Association has agreed to study the issue with an eye toward possible changes to its model rules for corporations, but that study will take at least a year. Most states will likely follow Delawares lead and put off any changes until the ABA makes its recommendations. Delaware, as the state where over half of the U.S.s largest companies are incorporated, is the state to watch for indications that the rules changes the shareholders want might be enacted. Some companies and organizations are beginning to respond to the shareholders concerns, however. US state pensions funds are reacting positively to requests to support the shareholders initiative. Additionally, some companies, including Caterpillar and Rayethon, are planning on putting the changes to a vote at their next meetings or are talking with shareholders in an attempt to reach a compromise on the issue.