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Calls Grow for the Right to Call Special MeetingsSubmitted by: Subodh Mishra, Governance Institute

Shareholders have in recent years sharpened their focus on the right to call special meetings. Between 2006 and 2008, RiskMetrics Group has tracked a marked uptick in the volume of investor proposals calling for the ability to do so. Often, the resolutions seek authority for holders of 10 percent of the company?s outstanding common stock to call a meeting, through thresholds have varied.

Critically, a number of such proposals have in recent years been omitted under the Securities and Exchange Commission?s ?no-action? process, whereby issuers can petition the commission to exclude a proposal under provisions of federal proxy rules. But far fewer proposals have been omitted in 2009 compared with 2008, setting the stage for greater movement on the issue heading into the spring annual meeting season, according to a recently released RiskMetrics report on special meetings and written consent.

RiskMetrics is currently tracking 70 such proposals, of which 55 remain pending. As of April 1, 10 have been omitted, two withdrawn, and three have been voted, including one at Becton, Dickinson, which received 60 percent support of votes cast ?for? and ?against,? according to the resolution?s proponent. That the proposals are going to vote in 2009 is noteworthy given the number of such resolutions that were omitted in 2008.

Companies also are responding to investor petitions for the right to call special meetings. In one recent case, corporate titan General Electric announced in February it would reduce the threshold to allow shareholders to call a special meeting from 40 to 25 percent. The move, which followed the filing of a proposal by shareholders John Chevedden and William Steiner, falls short of what many activists view as an ideal threshold for calling special meetings?10 percent?particularly at large capital companies. Still, GE?s decision bodes well for shareholders and is in keeping with a recent trend toward enhancing shareholder rights with regard to special meetings.

Providing the right based on a reasonable ownership threshold will continue to be a focus for investors. Of the 46 percent of S&P1,500 companies allowing shareholders to call special meetings as of Jan. 1, 2009, just under one-third (29 percent) provide for the right based on ownership of 10 percent of outstanding stock. The next most prevalent threshold is 51 percent, which 24 percent of companies have set, and then 25 percent, as set by 14 percent of corporations analyzed. Another 11 percent set the threshold at 50 percent, according to RiskMetrics data.

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on April 02, 2009 (boomark / email).