March 4, 2004

A 43% Withhold Vote! Wow!

Wow! The preliminary withhold vote on Michael Eisner, based on voting prior to the meeting (of course subject to final count and confirmation of inspector of election, and all the other disclaimers announced by Disney) was 43% yesterday. This is an extremely high number considering the highest withhold vote on a Fortune 100 director last year was in the mid-20s (for an “Enron” director who still sits on Lockheed Martin’s board).

Considering that roughly a quarter of the votes cast were broker non-votes – who routinely support management – more votes were actively cast against Eisner than for him. And this is all due to a media/Internet campaign against Eisner – with no proxy solicitator involved, a remarkable achievement. Also noteworthy is that three other “targeted” directors of Disney also received withheld votes in the low-20% range.

It will be interesting to see how these historic results are used to make arguments at next week’s SEC roundtable on shareholder access (eg. an argument that the proposed trigger thresholds can be easily reached and thus don’t need to be lowered versus an argument how investors would bother to actively vote if they knew their votes had consequences).

Carl’s Corner on Cumulative Voting

The March installment of Carl’s Corner acts as a Primer on Cumulative Voting.

NASD Sends Member Notice on Underwriting Rule

The NASD has sent out its Notice to Members 04-13 announcing the adoption of major amendments to the NASD’s Corporate Financing Rule–Rule 2710. The amendments were approved by the SEC on December 23, 2003 and the SEC approval order was published in the Federal Register on December 31, 2003.

As more fully explained in my interview with Suzanne Rothwell, these rule changes effect a new approach to underwriting arrangements. The Notice to Members summarizes the amendments and provides clarification regarding the application of Rule 2710 to straight debt and derivative securities. The Notice also includes the text of the amendments.