I know I had promised yesterday to do a diary about the new high-risk pools under health reform, complete with contact information, but this story, I think, needed a factual response. I will do the high-risk pools diary tomorrow - actually it might be up on my blog by tonight if you want to go check later.
Crossposted from The People's View.
Not much has changed in the progressive blogosphere. The propensity to demonize President Obama is alive and well. We find today a piece from the PCCC urgently telling people to tell the White House to stop protecting CEOs!(1) What's the problem? Well, it seems to be that based on anonymous reports, reactionaries have reached the conclusion that White House is fighting proxy access rules generally agreed to by both the House and the Senate in financial reform.
Well, before we get into why we should or shouldn't be charging at the President and the White House with pitch forks and torches, let's understand the issue first. What is proxy access? Simply put, it's the access to the corporate ballot to elect the Board of a publicly held corporation. Currently, the Board nominates candidates for a corporation's board, those candidates have ballot access, and those ballots are mailed to shareholders to either vote or designate a proxy to vote for them. This is all done at the expense of the corporation. So do shareholders wanting to nominate different candidates have any avenue whatsoever right now? Yes, they do, but barely. Prof. Lucian Bebchuck, a Harvard Law professor, explains:
Only board-nominated candidates get to appear on this ballot; challengers must bear the costs of sending (and getting back) their own proxy card to shareholders. Providing shareholders with proxy access — the right to place candidates on the ballot — would contribute to leveling the playing field.
If shareholders had the right to place candidates on the corporate ballot and have the corporation bear the costs of mailing, the process would be a great way for shareholders to hold the corporate Board accountable, and by extension, rein in executive compensation. We have seen runaway executive compensation with no relation to performance for a long time on Wall Street, but especially in the wake of the current financial scandal. Right now, the GOP candidate for US Senate in California is a woman who was fired by her Board - fired, mind you, with a $21 million golden parachute.
The House and Senate bills attempt to increase shareholder participation in two ways. One is by giving shareholders an advisory vote on executive compensation. While it's only advisory in nature, it would increase disclosure and scrutiny. The other is proxy access, which is what we're talking about here. The Senate side of the conference committee has now passed an amendment by Sen. Dodd to make proxy access essentially meaningless, by making the threshold to only shareholders who own 5% of the stocks of a corporation. Not even the largest pension funds or other public interest groups with stock holdings come close.
Let's be clear about one thing: the House and Senate bills, currently standing, do not have a hard threshold for how much stock a person or a group (or a group of shareholders) must hold in a corporation in order for them to have proxy access. Clearly, the threshold cannot be essentially zero. Not everyone with even one share of stock can be allowed to nominate candidates. What the House and Senate bills did was essentially grant the Securities and Exchange Commission the authority to issue rules with regards to shareholders' proxy access (Read for yourself if you'd like: House-passed bill Sec. 7222, and Senate-passed bill Sec. 972).
What was the SEC proposing? According to Prof. Bebchuk, a 1 percent threshold. According to the Huffington Post report that seems to have generated the PCCC freak-out, though, the largest pension funds are only likely to meet a half-percent threshold. Hmm, I don't seem to recall a big loud bang and rush to get people to sign petitions to lower that threshold to get the SEC to lower the threshold, do you? When was that rule proposed? July of 2009. Oh right, I forgot. Last year, PCCC and its allies had a different whack-a-mole for the President: health care. My bad.
While I am never surprised by propensity by a good deal of reactionary groups to dump on the White House and the President every chance they get, I am curious as to the validity of the claim that the White House, specifically Valerie Jarret, the White House's liaison to the Business Roundtable, is pushing for the Dodd amendment, making proxy access an wounded animal, if not meaningless. Huffington Post's only sources for this are the following:
Five sources with knowledge of the situation said the White House pushed for the measure to be stripped at the behest of the Business Roundtable. The sources -- congressional aides as well as outside advocates -- requested anonymity for fear of White House reprisal.
Ahh, the comfort of anonymity. We are not even told how many of the five anonymous sources were Congressional aides and how many "outside advocates." I understand the journalistic ethic to protect sources, but I think it's ironic that the advocates of corporate transparency do not have the courage to go on the record themselves. And White House reprisal? Give me a break. Democrats in Congress and outside progressive advocacy groups have never had any problems taking this White House to task publicly.
There is one named source in the story, and it's the Chairman of the House Financial Services Committee, Barney Frank. And here's what he said:
Frank said that he wasn't certain the White House was involved.
Oh, that's interesting. If the White House was pushing hard for something in conference on the Financial Reform bill, wouldn't you think the Chairman of the House Financial Services Committee and the first named conferee from the House would know about it? By the way, Speaker Pelosi and Chairman Frank are not backing off (evidently, despite all this cooked up White House "pressure"). But yes, the fear of "White House reprisal" is so great. I'm shivering as I type.
Secondly, there's a big bru-haha about how this is betrayal and how the White House is flip flopping. The fact is that the White House never took an explicit position on proxy access. HuffPo, to their credit, printed the Administration response:
It was not part of our original financial reform proposals, and we have not taken a position explicitly. We have heard from and understand the various concerns on this critical corporate governance issue from multiple stakeholders including business, investors, labor and others. We are confident that the House and Senate conferees will come to a resolution and deliver a consensus view.
It sounds to me like the White House is doing what it does a lot - letting Congress write the law (gasp, the nerve!), and isn't taking a position one way or another. Can they be faulted for not taking leadership on this issue? Probably. But I don't see anything verifiable that confirms that the White House actually lobbying to keep proxy access out.
In all of this, as usual, we are so focused on speculating about what the White House is doing, that we are not paying any attention to the real culprit. Sen. Chris Dodd, whose amendment it was, and the rest of the Senators . The PCCC could have spent its resources and time getting people together to sign a petition to Sen. Dodd, or to him and Senators in general. They could have spent their considerable media presence to ask people to get into the legislative process and make sure the House stands firm. They could have lit up the phone lines in Congress. They could have researched Sen. Dodd's significant interests invested in banking. Hell, they could have organized people to deliver a message to the Business Roundtable. But you see, the outrage for them is not about the policy. It's about the White House, and it's about riling people up against the President.
So, I'm going to give out a call for a different kind of action. Instead of getting mad at the White House based on sources who claim they want transparency but won't go on the record themselves, act on what we know. We know the Senate side is the problem. We know that Chris Dodd is the banks' guy on the Hill. We can call him and tell him to back off and represent the interests of shareholders instead of Wall Street:
Here is a list of all the conferees - House and the Senate. Call them, especially if they represent you. Look them up on House.gov and Senate.gov. But first call the Senate Democrats who did not support Sen. Schumer's amendment to nullify the Dodd amendment, and tell them you need them on the side of reform:
Blanche Lincoln - (202) 224-4843
Tim Johnson - (202) 224-5842
Then call your House member and Senators and tell them to stand strongly on the side of proxy access for shareholders. Make sure Congress knows you are paying attention. You want to make sure the law is as strong as possible? Light up their phone lines. Fill up their Inboxes.
And last but not least - call the White House. 202-456-1111
And tell them to take a position and push Congress to preserve SEC's authority to grant shareholders greater access to the corporate ballot. Don't be accusatory. Call, deliver your message and your position, and tell them this is important to you.
News is now breaking that House and the Senate conferees have reached a deal that essentially protects shareholder access to corporate ballots to challenge insider Board candidates, rejects Chris Dodd's ill-founded attempt to impose a 5% ownership threshold, and gives SEC the ability to exempt small publicly held companies.
After some more back-and-forth discussion Thursday night, House and Senate negotiators agreed to go back to where they started, leaving it to the SEC to decide what ownership requirements shareholders must meet to gain proxy access.
Special thanks to those who made calls or otherwise contacted members of Congress. Can we please now stop the knee-jerk freak-out?