On financial reform, Dodd gives activist shareholders more power

His Senate financial-reform bill includes provisions that give activist shareholders more say in the election of company directors.

Harry Hamburg/AP
Sen. Christopher Dodd (D) of Connecticut (center) talked with Connecticut Attorney General Richard Blumenthal (left) and Sen. Mark Warner (D) of Virginia on Capitol Hill March 16. His finance reform proposal includes language tht would give shareholders more power to elect directors.

Senator Chris Dodd rolled out a Financial Reform bill draft yesterday, and contrary to what many expected, the governance proposals all remained intact. Dodd has this one correct in my opinion, I just don't know if he has the juice to get it done seeing as how he's lame ducked himself and the White House seems to be nowhere near this issue right now.

Anyway, here are the provisions that are relevant to activist shareholders and corporate governance types...

From RiskMetrics Blog:

Section 971 would direct the SEC to act within one year to direct the national securities exchanges (e.g., the NYSE and Nasdaq) to require majority voting as a listing standard. This provision would authorize the SEC to exempt issuers based on market capitalization or the number of shareholders. This provision would require a unanimous board vote to reject the resignation of a director who fails to win a majority of votes cast.

Section 972 would authorize the SEC to adopt a proxy access rule “for the protection of investors,” but the bill doesn’t set any specific standards. The House bill has similar language.

The bill includes provisions (Section 954) concerning the “claw back” of “erroneously awarded” compensation, as well as language (Section 952) that seeks to strengthen compensation committee independence and the independence of committee advisers.

Most of this stuff is commonsensical and will probably not meet with much resistance. Imagine a world where corporate execs are actually responsible for their actions! We'll talk more about what this means for investors on Stock Wars tomorrow night.

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