Fund Seeks to Ban 'Nuisance Shareholders'

The Free Enterprise Action Fund wants Exxon Mobil Corp. and Charles Schwab & Co. shareholders to consider banning advisory proposals favored by activist stockholders it views as a nuisance, according to Dow Jones Newswires.

Advisory or "precatory" proposals aren't binding on companies, but they are a popular vehicle for shareholders to express their views on issues from climate change to executive compensation.

The Free Enterprise Action Fund (FEAOX) in Bethesda, Md., is seeking to close off that option and has filed proposals with Exxon Mobil and Schwab targeting what it calls "nuisance shareholders."

Specifically, the fund wants shareholders at both companies to vote this year on amending the companies' bylaws to preclude shareholders from offering non- binding proposals in the future.

"Shareholder proposals have simply become a way to harass companies," said Steven Milloy, co-head of the $11.5 million FEAOX.

Labor unions, environmental groups and socially conscious investors supply the vast majority of non-binding shareholder proposals, and "we don't consider them real shareholders," Milloy told Dow Jones Newswires. "They just use these proposals to gain influence over the companies. We'd like to see that stuff go away."

Exxon Mobil faces dozens of "nuisance" proposals from shareholders each year, said Milloy. He added that Schwab has been "besieged" by labor unions because the online brokerage firm's chief executive, Charles Schwab, supported the Bush administration's call for Social Security reform.

Companies ought to close the door on "nuisance" shareholders now, because if a Democrat is elected president, it all but ensures the Securities and Exchange Commission will favor increasing shareholders rights, not decreasing them, Milloy asserted.