Investors Clamor for Voting Rights

Some of the world’s largest investment managers have appealed to US regulators to give shareholders the right to change the composition of US boards. They claim shareholders in US companies lack basic rights which are given to shareholders in other developed countries. The appeal is a sign that one of the key creed of US corporate governance - limited shareholder get access to company proxies for board elections - comes under attack from non-US investors as foreign ownership of US companies is increasing.

The group, which manages about $34,000 billion in assets collectively, has written a letter to Christopher Cox, chairman of the Securities and Exchange Commission. The letter is signed by the Australian Reward Investment Alliance, the Association of British Insurers, F&C Asset Management, the Third Swedish National Pension Fund, Scottish?based Standard Life Investments and PGGM-a large Dutch pension fund manager. In the letter, the group appeals the regulator to give investors the right of voting in the election of directors. This move, the group thinks, might help to prevent corporate scandals and board-level negligence of duty which have surfaced in recent years in US companies.

The move follows the delay of a key SEC meeting that was to discuss whether shareholders should be allowed more access to company proxies. The SEC was to decide whether to let stand a recent US court ruling that had forced the regulators to review its policy that blocked shareholder access to proxies where elections of board directors were concerned.

The matter has become a key battleground in US corporate governance. Shareholder rights activists have strengthened efforts to get access to the proxy to contribute in the composition of company boards-and therefore also in such matters as executive compensation.

“The US system is at odds with shareholders’ basic ownership rights and lags behind other countries in corporate democracy”, said Peter Moon, chief investment officer of the Universities Superannuation Scheme. “It is critical that US policymakers understand that this has ramifications for how overseas investors view the integrity of the US markets”, he added.