For Immediate Release
Thursday, February 27, 2003
AFSCME Pension Plan Appeals SEC Staff Recommendation on Proxy Access Proposal, Calls on Full Commission to Permit Shareholder Vote at Citigroup, Five Other Companies
WASHINGTON —The AFSCME Employees Pension Plan filed an appeal yesterday with the Securities and Exchange Commission. The appeal asks the Commissioners to permit shareholders to vote on the Plan's proposal to expand the rights of shareholders to nominate individuals to the board of directors of Citigroup, Inc. Currently, only candidates that are nominated by an incumbent board of directors are included on the ballots that companies distribute to their shareholders. If shareholders want to nominate a candidate, companies are not required to mention the candidate or to include that candidate's name on the ballot. If a shareholders' candidate wants support, they must bear the significant expense of printing, distributing and collecting their own ballots, as well as their own campaign material. Corporate boards closely guard their exclusive access to the ballot. The AFSCME Plan's proposal would allow shareholders to vote on whether their company's materials (including the ballots) should include information on both the candidates nominated by the board of directors and the candidates nominated by shareholders that own at least 3% of the companies stock.
"The enormous losses suffered by shareholders at the hands of inept directors at a number of companies over the past year point to the timeliness of our appeal to the Securities and Exchange Commission. The shareholder proposal rule was designed to allow shareholders to decide for themselves the types of rights and governance structures that are in their own best interests. Our proposal is a reasonable way for shareholders to gain a greater say over who is elected to watch over their interests," said American Federation of State, County and Municipal Employees President Gerald W. McEntee. McEntee also chairs the AFSCME Plan's board of trustees.
"For too long, electing directors has been little more than a coronation process. By allowing our proposal to be voted on at Citigroup and the five other companies that have received similar proposals, the Commission can make clear that shareholders have the right to choose whether to play an active and legitimate role in the nomination and election of directors. Shareholders should not have to be damaged any further by the failures of self-perpetuating boards. The time is now for the Commission to act," McEntee continued.
Earlier this month the SEC's Division of Corporation Finance notified the AFSCME Plan that they had issued an opinion to Citigroup that it could omit the Plan's proxy access shareholder proposal. While an SEC staff opinion letter (which is often referred to as a "no-action letter") is not legally binding, companies routinely follow the advice offered. Shareholders and corporations have the right to appeal the staff rulings' to the full Commission if the ruling raises a significant policy issue.
Until recently, the SEC staff had found that proxy access proposals, as well as other proposals related to board elections, should be included in a company's proxy materials. AFSCME's appeal seeks to reinstate the prior position of the staff and get a first time, formal ruling from the full Commission. Five other similar proposals, submitted to Exxon Mobil, Bank of New York, Eastman Kodak, AOL Time Warner and Sears, Roebuck, would be effected by a Commissions ruling.
