May 23, 2009
Dear Mr. Breheny;
This email is intended to respond to the SEC's recent proposal to facilitate the rights of sharebholdrs to nominate directors on corporate boards.
First of all, I want to applaud the SEC's efforts to improve shareholder's reghts, when, as a shareholder in many corporations, for many,many years, I have been subjected to the incompetence, self serving and uncaring atitudes of so many "good ol' boys". Hopefully your new rules will go a long way toward rectifying past faults.
While easing shareholdrs' abilitites to get their own nominees voted on, I will appreciate you addressing an even more important weakness in the voting rules. That is what I call "rigging" the election. Directors, particularly in small companies, control the outcome of voting, through manipulation.
First of all, By Laws can restrict the number of board members. In one case that I am personally involved in, the By Laws allow for six members, and the six nominees who get the most votes are automatically elected. With this technique, a nomineee who gets only one vote would be elected. While your proposal will allow a more open window on who gets voted on, it will still be extremely diffiult to alter the outcome. To make the playing field more level,
ALL MEMBERS SHOULD BE REQUIRED TO GAIN A MAJORITY OF VOTES FROM THE QUORUM BEFORE THEY CAN BE CONSIDERED ELECTED.
Failing a majority, the nominee should be dropped from consideration. You would be amazed at how many shareholders really feel that it already takes a majority.
Second is the fact that insiders have a significantly unfair advantage. Certainly, the insiders think their nominees and their proposals are worth voting in, which they may, or may not be, correct in thinking. But insiders should not be allowed to vote on nominees or proposals.
THE ISSUES AND THE NOMINEES SHOULD BE REQUIRED TO GAIN A MAJORITY OF THE 'NON INSIDER' VOTES.
Allowing them to vote for themselves and their cronies is just another way of rigging the vote.
Lastly, it is common practice among institutions and funds to have a policy that they either vote for the Board's recommendations or they sell the stock. This deprives the individual shareholders of fairness. On the one hand, the Board has a very good bet that their nominees and proposals are going to win, because big holders will not cast a "NO" vote. Funds and institutions have a disproportionall heavy influence in the conduct of small companies;
FUNDS AND INSTITUTIONS SHOULD BE REQUIRED TO VOTE 'YES' OR 'NO'.
Once again, I want to thank you for your efforts, but please address the issue of controlling the outcome as well as nominating the board.
William J. Nassif