April 12, 2010

Parsing Corp Fin’s Comment Letters: A Withdrawn “Shareholder Responsibility” Proposal

When Corp Fin’s comment letters (and responses) became publicly available a few years back, it was natural to think that this blog would be regularly analyzing this important back-and-forth process. For a number of reasons, we haven’t gone in that direction.

But once in a while, a comment letter comes to your attention, one that can’t be ignored. Last year, North American Galvanizing & Coatings filed this preliminary proxy statement with an innovative (and problematic) proposal that would restate the company’s certificate of incorporation with a provision that sought to make large shareholders “liable” for the consequences of voting in favor a shareholder proposal (see Proposal 5 on page D-34). In other words, the restated charter would have essentially saddled 1% or greater shareholders with the same responsibility as directors.

As noted in the company’s response, this proposal was withdrawn from the proxy statement in response to this Corp Fin comment letter. As the comment letter notes, this proposal would have to overcome a heap of state and federal law issues – and likely would be subject to a heated legal challenge from activists.

Interestingly, Joe Morrow – well-known founder of proxy solicitor Morrow & Co. – is Chair of North American Galvanizing & Coatings’ board and a major shareholder of the company. I have no idea whether Joe was involved in coming up with the idea for this proposal.

Justice Stevens and the Loss to Investors/Shareholders

In his “Race to the Bottom Blog,” Prof. Jay Brown continues to write interesting stuff. His latest is analysis of the impact caused by Justice Stevens’ retirement on the securities law cases heard in the US Supreme Court.

More on our “Proxy Season Blog”

With the proxy season in full gear, we are posting new items regularly on our “Proxy Season Blog” for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Microsoft’s Video Interview with a Director
– Annual Meeting Scripts: The Skinny (and Samples)
– Fixing the Problems with Client Directed Voting
– 2010 AFL-CIO Key Vote Scorecard
– Preparing the New Proxy Disclosures: Some Examples and Analysis

– Broc Romanek