Example of the "Proxy
For those of you who are concerned with the "proxy plumbing" issues
currently being considered by the SEC, a recent litigation case may provide
you with a useful demonstration of the need for improvements.
Apache Corporation has initiated a court action against John Chevedden, the
well-known governance activist, for a judgment allowing the company to block
his submission of a shareholder proposal based on his inability to provide
legally satisfactory proof that he owns the required shares. According to
the complaint, Mr. Chevedden provided records that he did in fact own
shares, but the financial service firms that confirmed his position did not
appear in the records of registered ownership. Leaving aside the comical aspects of this case, the
court filing shows clearly that our current system of defining ownership is
Whether you think this effort to block a shareholder proposal is proper or
not, I assume you will agree that there is something wrong with rules that allow this argument to be made.
What seems like a simple matter of defining "ownership" of stock has become
a real challenge, especially in the context of recently evolved securities
lending and derivatives practices, and needs to be resolved before anyone can
sensibly consider what kind of "plumbing" hardware to order.
It should be noted that there are no plans for the Forum to develop a
program addressing "proxy plumbing." It is a subject that concerns many
Forum participants, though, and your comments will be welcomed.
GL – January
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022