Note:  The article accessible from the link below, published in the newsletter Board Alert, suggests a need to correct two misconceptions relating  to the Franklin Mutual shareholder proposal:

1.  The proposal would not change the company's existing provisions for indemnification, which allow directors the maximum coverage permitted by law.  Instead, it applies the existing provisions -- established by Section 317 of the California Corporations Code and the company's Bylaws -- to let shareholders decide whether the conduct of directors met the law's standards for indemnification.  The proposed resolution addresses only indemnification for specified past conduct, and would have no effect on the rights of directors to be indemnified for any future conduct.

2.  Although the California statutes allow several alternative methods for determining whether director conduct meets the standards required for indemnification, as the article reports, this does not mean that directors can act to override a shareholder vote.  The statute that defines indemnification rights addresses the ranking of director and shareholder actions explicitly.  Subdivision (h) of the California Corporations Code's Section 317 states clearly that, in the absence of a court decision, "no indemnification or advance shall be made" if it appears that "it would be inconsistent with ... a resolution of the shareholders."

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