Halliburton succeeds in stifling shareholder democracy
10 Feb. 2005
WASHINGTON, Feb. 10 (HalliburtonWatch.org) -- The Securities and Exchange Commission (SEC) staff on Monday rejected requests to give Halliburton shareholders greater control over the board of directors. The American Federation of State, County and Municipal Employees (AFSCME) -- a union which owns stock in Halliburton -- had asked the SEC to give shareholders greater control over the process for nominating people to the board of directors. ###
Each year, shareholders of all public companies receive a "proxy" in which they are asked to vote for or against nominees to the board. But nominees are chosen primarily by top executives. Shareholders are mostly locked out of the nomination process. They can't even use the company's mailing list to propose nominees to other shareholders.
The SEC's decision forbids AFSCME from including its alternative nominees on Halliburton's proxy statement. So, only nominees chosen by Halliburton's elite will appear on the proxy. It contravenes overtures by the SEC during the presidential campaign to provide greater shareholder control over corporate boards.
As corporate crime became a political hot potato during the presidential campaign, the SEC proposed giving shareholders greater control in choosing nominees for the board of directors. But corporate America vehemently opposed it on fears that shareholders would use their new powers to terminate entrenched CEOs and directors.
Institutional investors like AFSCME argued that greater shareholder involvement in nominating people to serve on corporate boards will help prevent accounting fraud and other popular abuses by senior executives and directors. (Note: Halliburton settled SEC accounting fraud allegations last fall).
SEC Chairman William Donaldson jumped on the anti-crime bandwagon, announcing his support for greater shareholder involvement in choosing board nominees. But following the presidential campaign, the chairman has apparently changed his mind. In December, the SEC's corporation finance division told Walt Disney Co. it could prohibit shareholders from influencing who will serve on the board of directors, reversing its earlier recommendation against the company. And Monday's decision on Halliburton further indicates the chairman no longer supports shareholder democracy. The conservative Houston Chronicle chastised the chairman for flip-flopping, saying he "swapped his reformist attitude for the demeanor of a corporate shill."
But SEC spokesman Matt Well, in an interview with Reuters this week, said: "Chairman Donaldson's position has not changed. He believes something needs to be done on shareholder access and continues to work toward an approach that addresses legitimate concerns on both sides of the issue." Nevertheless, the SEC's original proposal for greater shareholder democracy appears dead.
"The staff has taken a half step backwards at a time when the commission should be taking two steps forward," SEC Commissioner Harvey J. Goldschmid, a Democrat who supports giving investors the ability to nominate board members, said in a statement. "Unfortunately, the worst instincts of the CEO community have continued to triumph," he said.