Big Business SEC Lawsuit Tries to Shaft Investors

Showing America that they side with wealthy CEO's and not investors, the U.S. Chamber of Commerce, the nation's biggest business lobby, and the Business Roundtable sued the Securities and Exchange Commission today. They are attempting to overturn a rule that makes it easier for investors to oust corporate directors, Businessweek reported today. The two groups decided to sue after completing a legal analysis of the regulation, they said at a news conference in Washington. The rule, which allows shareholders owning 3 percent of a company to nominate board members on corporate ballots, was passed by a divided SEC last month. “These rules are wholly unnecessary,” said David Hirschmann, president of the chamber's Center for Capital Markets Competitiveness. “This special interest-driven rule will give small groups of special-interest activist investors significant leverage over business activities.” The SEC, in a 3-2 vote, stipulated that investors or groups of shareholders who have owned 3 percent of a company for three years could have board candidates on proxy statements. SEC Chairman Mary Schapiro has said the 2008 credit crisis, which cost financial firms more than $1.82 trillion, shows shareholders need more clout in picking board members to oversee companies. Interestingly, these new rules only make it possible to nominate board candidates, and shareholders still must approve the candidates on a proxy. The suit indicates that the Roundtable and U.S. Chamber of Commerce are afraid of letting shareholders vote for their choices for board members. Under the regulation, shareholders would be able to nominate at least one director and as much as 25 percent of a board. Investors couldn't use the rule if their intent is to oust a majority of board members and take over a company. This lawsuit shows the contempt that the Roundtable, and U.S Chamber of Commerce have for investors. Experts have said that poor corporate boards not only contributed to the financial crisis but are an epidemic that is causing the USA to be non-competitive. I think the crux of the problem is that American corporate boards practice lax oversight and cronyism, in general. I previously wrote about this problem in an article entitled, Boards of Directors – 60 Ways to Screw Your Shareholders, here at Benzinga. http://www.benzinga.com/markets/company-news/management/122383/boards-of... The article also reviews the excellent book about the subject called, Money For Nothing