Investor targets J.P. Morgan, Bear Stearns

Fallout from the subprime mortgage crisis may lead to a director shuffle at both Bear, Stearns & Co. and J.P. Morgan Chase & Co. At least that’s what institutional investor Richard Ferlauto, director of the American Federation of State, County and Municipal Employees hopes to achieve with proposals that would seek to eventually elect directors at both these companies, according to The Deal.

AFSCME is submitting so-called shareholder access proposals, which is a two-step process for getting a shareholder director candidate listed on corporate proxies. AFSCME, holding a significant stake in a corporation for at least one year, submitted a bylaw proposal seeking to nominate director candidates at the two companies. If the bylaw measure isn't removed and it passes, AFSCME would then be able to nominate a candidate for the company’s board on the company’s proxy card in the following year’s election.

Ferlauto is arguing that shareholders should be able to put a director candidate on corporate boards because management at these companies mismanaged risks associated with subprime mortgages, leading to shareholder losses.

But it looks like Ferlauto isn't going to get his way — at least in the short term. The SEC adopted a rule that allows companies to remove such proposals from their proxy statements. These companies are expected to use the Commission’s authority to remove the AFSCME measures. In an interview with The Deal, Ferlauto says he will challenge a decision by either of these corporations to remove the proposal.