Pension funds, mutual funds and other institutional investors would not take advantage of new powers to nominate directors to corporate boards if the SEC adopts a proposed rule to allow shareholders access to corporate proxy material, according to a comment letter to the SEC by the Committee of Concerned Shareholders.
The proposal has elicited 21 comment letters so far, with a large majority supporting the idea.
“Pension funds have had and have the ability to seek (board of director) and management accountability through inexpensive proxy contests (to nominate directors), but, if the past is prologue, do not have the will to exercise their power,” wrote Les Greenberg, chairman of the committee, a shareholder advocacy group.
“Mutual funds will not actively participate in proxy contests even if the proposed rule is enacted,” Mr. Greenberg wrote. “It would be detrimental to their financial interests vis-a-vis the financial interests of their public investors.”
Jon Lukomnik, IRRC Institute program director, wrote in a letter Tuesday detailing a recent study that found the return shareholders get from companies with dissident directors elected to a minority of seats was 16.6 percentage points better than peer companies without insurgent members over a 15-month period beginning at the start of the proxy contest. While the IRRC Institute “does not take any advocacy positions,” its “study can help inform the commission in its deliberations about the proposed shareholder director nomination regulation,” he wrote.
Anthony Chiarenza, president of Key Equity Investors, also favored the proposal. “We have unfortunately been faced with numerous occasions when managements and boards of public companies have been completely unsympathetic to the rights and wishes of outside shareholders,” his letter said. “We desperately need the help of the commission to allow significant shareholders to have the ability to nominate their own directors to the board of their companies, without the prohibitive burden of undertaking a proxy contest.”
The deadline for commenting to the SEC on its proposal is Aug. 17.