New Gripes Aired this Proxy Season

A slew of new proposals and issues found their way on to the ballot during the 2008 proxy season. The mortgage meltdown, succession planning, and the safety of imported products were brought up for debate.

Shareholders proposed the evaluation of mortgage practices and the establishment of a committee of outside directors to develop and enforce policies regarding lending practices at homebuilders Beazer, and Pulte. A total of five different proposals were submitted for consideration and of those, three were won by the companies and two by the proponents.

Succession planning also stemmed from the mortgage securities crisis. As a result, Citigroup and Merrill Lynch had a change of CEOs. Activists believed the lack of succession planning at those companies warranted a needed succession planning process.

Merrill Lynch, Verizon, Bank of America and Toll Brothers sought no-action ruling from the Securities and Exchange Commission this season on proposals asked the board to initiate a process with written and detailed guidelines for a succession planning policy.

These companies’ proposals were excluded on the basis that CEO succession planning is related to “management of the workforce.” The concern was allowing the public too much knowledge of confidential information. Going forward, this issue will reappear as increased public debate will most likely bring the need for attention to CEO succession procedures.

Imported product safety also made its debut as a result of the recent product recalls due to lead tainted children’s toys. Interestingly, Walmart and Home Depot’s proposal to report on the safety of imported product received no-action relief because the proposals dealt with the “sale of particular products,” while Mattel's request was denied.

While shareholders have voiced their concerns, this 2008 proxy season so far seems to be tipping in favor of the companies.