A shareholder victory

 

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For the past two years, if you wanted to know what was happening in the financial world, you looked first to Washington, then maybe glanced at Wall Street.

With a Democratic president at the helm, that Washington-first formula created a sure-fire move towards strengthening the position of the little guy.

There has certainly been no coup de grace to finish off big business. In the regulatory reshuffling, banks have not been subjected to a painful transaction tax. The Glass-Steagall Act of 1933 was not reimposed. Even the proposal for tax banks to pay for the financial overhaul was defeated, despite the impression that banks closed one eye during the profitable years when the housing market bubble was working in their favor.

Lehman Brothers collapsed, but more than a few big banks have survived and some -- Bank of America and Wells Fargo & Co. -- got handsomely bigger. The executive salary scare faded as surely as the folk music scare that threatened to add poetic intelligence to pop music in the 1960s. And banks are now in the process of having legal teams paint over their soon-to-be-banned proprietary lending to have that blend in to the stew pot of trading they are allowed to do. Regulators already find it difficult to separate the bank's positions from those of their clients. In the future, good luck with that.

Not to forget, banks, car companies and a few others were handed a fair amount of cash when the chips were down.

Throughout the mess of the past two years, it has not been Washington, but the economy itself that has punished big business. When the U.S. Securities and Exchange Commission attempts to fine a bank a few million dollars for a mishandled deal worth a few billion, it is the shock wave of investor retreat that provides the real punch in the stomach.

Big has not suffered so much, but the truth is in 2010 David now has more rocks to throw at Goliath than he did in 2007. The passage of a credit-card reform bill, the creation of a Consumer Financial Protection Bureau, overdraft fee regulations and host of protections in the financial reform bill passed in July attest to more than a nominal swing of influence. Little has done all right.

This week, the SEC added to the strength of the shareholders by approving the so-called "proxy-access" rule, which will require corporations to include shareholder-nominated candidates for seats on the corporate boards to their own lists of nominees. The SEC set a minimum of ownership of 3 percent of a public company for at least three years before a shareholder group can submit a nomination. Starting in 2011, corporations will now have to include legitimate dissident nominees in proxy materials. Board members will, essentially, be put in the position of treating those who could take their seats with at least due diligence.

Hedge funds and so-called activist investors, like Carl Icahn, will be a bigger threat to the club of executives at the top of public firms. The move, approved by a 3-2 vote among SEC commissioners -- a vote split along party lines -- will "enhance investor confidence in the integrity of our system of corporate governance," said SEC Chairwoman Mary Schapiro.

The SEC's two Republican commissioners voted against the proxy access rule and Commissioner Kathleen Casey suggested the rule would not stand up in a court challenge.

In part, the SEC failed to submit proxy access to "serious analytical rigor," she said, adding the rule would cause "significant harm to our economy," The Wall Street Journal quoted her as saying.

It may or it may not, but with the economy suggesting it could tip into a double-dip recession, there is a growing fear that the dramatic policy shifts -- billion dollar bailouts and massive stimulus programs -- have come and gone. At this point, changes will likely be handled one chip at a time, a rule change here or there that has significant impact.

In international markets Thursday, the Nikkei 225 index in Japan added 0.69 percent, while the Shanghai composite index in China gained 0.27 percent. The Hang Seng index in Hong Kong fell 0.11 percent, while the Sensex in India climbed 0.26 percent.

In Australia, the S&P/ASX 200 rose 0.83 percent.

In midday trading in Europe, the FTSE 100 index rose 0.44 percent, while the DAX 30 in Germany rose 0.15 percent. The CAC 40 in France gained 0.25 percent, while the pan-European DJ Stoxx 50 rose 0.35 percent.