FOR IMMEDIATE RELEASE                                         
Friday, June 12, 2009                                          

CONTACT: Cullen Schwarz
(202) 225-5802

CONGRESSMAN PETERS INTRODUCES BILL TO EMPOWER SHAREHOLDERS

Congressman Peters Carrying Bill to Codify Measures Announced by President Obama This Week to Curb Executive Pay; Bill Also Expands Shareholders’ Rights

Washington, D.C. – Congressman Gary Peters today introduced legislation to expand shareholder rights and give investors a greater voice in overseeing the companies they own.  The Shareholder Empowerment Act would make common sense changes to corporate election rules, executive compensation and other practices to encourage accountability to investors and protect against reckless risk taking that helped push the financial sector to the brink of collapse in recent months. 

The Obama Administration announced this week that it supports legislation to allow shareholders to vote on executive compensation and SEC rule changes to ensure that compensation committees are properly independent of management.  Congressman Peters’ bill implements both of the administration’s objectives and includes further measures.

“As an investment advisor for over 20 years, shareholder rights issues have always been very important to me,” said Rep. Peters.  “This bill empowers shareholders, a company’s true owners.  Wall Street executives who pursued reckless investment strategies were a major contributing factor to the recent financial meltdown.  Ensuring that executives act in investors’ long-term interest rather than for their own short-term gain is critical to prevent a similar economic collapse in the future.” 

The Shareholder Empowerment Act would (full summary below):

o                   Make corporate elections fairer by allowing investors more of a voice in company elections by requiring directors to receive a majority vote in uncontested elections, allowing investors to nominate a candidate for director on management’s proxy card and eliminating uninstructed broker votes that allow fund managers to vote on investors’ behalf;

o                   Keep compensation advisors independent by prohibiting them from performing other consulting in which it reports to company management (endorsed by the Obama Administration this week);

o                   Provide for an annual advisory shareowner vote on the compensation of senior executives (endorsed by the Obama Administration this week);

o                   Prohibit the same person from serving as CEO and board director;

o                   Strengthen clawback provisions to recover executive bonuses or other payments awarded on the basis of fraudulent or faulty earning statements;

o                   Stop golden parachute payments to executives who are terminated for poor performance;

o                   Curb excessive risk-taking of the sort that led to the current financial meltdown by requiring shareholders to be informed of the performance targets being used to determine bonuses and other incentives.

Full Summary

Shareholder Empowerment Act of 2009

MAJORITY VOTING FOR DIRECTORS

Under the plurality voting standard that is the default in most state corporate statutes, the candidate receiving the most votes is elected.  In uncontested elections, shareholders can protest the candidate by withholding their vote, but there is no mechanism for opposing a candidate because even one vote would be sufficient for election.  This provision would require a candidate running in an uncontested election to receive votes from a majority of shareholders, and would require a candidate running unopposed for reelection to resign if he or she failed to obtain majority shareholder approval. 

PROXY ACCESS.

Currently, companies have the ability to keep director nominations by shareholders off of proxy ballots.  This means that shareholders who want to nominate a candidate must incur the cost of mailing election materials to all shareholders.  This provision would give shareholders that have held at least 1% of a company's shares for at least one year access to proxy forms to nominate directors.

UNINSTRUCTED BROKER VOTES IN UNCONTESTED DIRECTOR ELECTIONS.

The SEC is currently considering whether to approve a change to New York Stock Exchange rules that allow brokers to vote the shares they hold under management in uncontested elections if the owner of that share does not provide voting instructions within ten days of a company meeting.  It is estimated that around three quarters of corporate shares are managed by brokers, and most of these votes are cast for management candidates.  This provision, in conjunction with the majority voting requirement for uncontested elections, will give shareholders a tool to contest management candidates. 

INDEPENDENT CHAIRMAN OF THE BOARD OF DIRECTORS

This provision would require companies to split the Chairman and CEO roles.  According to a recent policy paper published by the California Public Employees’ Retirement System (CalPERS) endorsing independent chairmanships, independent chairmen more closely align corporate boards with shareowners, curb conflicts of interest, better manage the relationship between the board and CEO, and lead to the development of an independent board.

SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION.

This provision would give shareholders an annual vote on the compensation packages of senior executives.  During the 110th Congress, the House voted in favor of “say on pay” legislation sponsored by Chairman Frank by a vote of 269-134.  The Obama Administration has endorsed the concept, and the Treasury Department is expected to issue rules requiring financial firms that have received federal assistance to give shareholders a vote on executive compensation plans. 

INDEPENDENT COMPENSATION ADVISERS.

This provision requires corporate boards that retain independent compensation advisers that report solely to the board of directors or the compensation committee.  Firms that provide compensation advice in addition to other types of consulting services may have a financial incentive to approve compensation packages that make management happy, but that do not represent the best value for shareholders. 

CLAWBACKS OF UNEARNED PAY.

This provision requires that companies recover or cancel payments that were awarded to executives on the basis of fraud or faulty earnings statements.  This is a common sense reform that ensures poor management is not rewarded. 

NO SEVERANCE AGREEMENTS FOR POOR PERFORMANCE.

This provision eliminates golden parachutes or other generous severance packages for executives that are terminated for poor performance.  These agreements can otherwise provide executives at poorly performing companies with immediate access to stock options, continued health care coverage, and other perks that are not in shareholders’ interests. 

IMPROVED DISCLOSURE OF PERFORMANCE TARGETS.

During the current financial crisis, we have seen numerous examples of executives compensation packages that seem to be designed around the “heads I win, tails I still win” model, where executives have been awarded lavish bonuses despite poor corporate performance.  This provision would improve shareholder access to the specific performance targets that are used to determine eligibility for bonuses and other incentive compensation. 

###