A Few Shareholders Could Gain Access to Proxies

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

Capitol Update, March 26, 2004 Share this on FacebookTweet thisEmail this to a friend

Assemblymember Judy Chu (D-Monterey Park) has introduced AB 2752, which would give shareholders more access to the proxies to elect directors. The bill requires public companies doing business in California to permit shareholder groups holding as little as 2 percent of a company's voting securities to nominate directly at least 40 percent of the company's directors in each board election. Each company would facilitate this direct nomination process by permitting shareholder groups to solicit support on the company's website and its proxy statement. Additionally, AB 2752 requires a corporation doing business in California to implement any shareholder proposal that passes by a majority vote and the proposal is clearly advisory.

Both the author and the sponsor, Kevin Shelley, Secretary of State, are concerned that while efforts are underway at the federal level to address this issue, such decisions often take months or years to get approved. Concerned that another “Enron" or "Worldcom” scandal could occur, they want California investors able to assert control as soon as possible

This bill could create opportunities for special interest groups to assert power over board activity not in the interest of majority holders. In addition, corporations incorporated outside California and doing business around the world would have to comply with the California law, which would be different than current federal law, and potentially different from other states.

AB 2752 is not yet set for hearing. The CMTA Corporate Counsel Committee will be reviewing this bill to fully understand its impact on California manufacturers.
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