Energy companies lose round vs. NYC funds in proxy access battle

[February 28, 2015]  By Ross Kerber
 
 BOSTON (Reuters) - Exxon Mobil Corp and three other large energy companies failed to block shareholder resolutions on director nomination rules put forth by New York City pension funds, making it more likely investors will get to vote on the hot issue this spring.

The Securities and Exchange Commission rejected requests by Exxon, Chevron Corp AES Corp and Southern Company for permission to skip votes on the proposed new rules, according to agency documents.

The rulings were a win for New York City Comptroller Scott Stringer, who oversees funds with $163.4 billion in assets. He has proposed votes at 75 companies to adopt new "proxy access" rules that would make it easier for groups of shareholders to run their own board candidates.

Stringer said the SEC's rulings show the energy companies used a weak theory about a potential "Ownership Gap" to make their case to the SEC.

"Productive dialogue and negotiated solutions, not petty legal actions, should be the goal for boards and shareholders alike," Stringer said in a statement.

A few companies have embraced proxy access, which is shaping up as a key issue for the spring corporate meeting season. But some business groups worry it would help activist investors.

The four energy companies argued New York's funds did not provide proof they owned their shares for a full year, as required to file a resolution. They cited what they called a "2013 Ownership Gap" from Oct. 31 to Nov. 1 of that year, when the funds were transferring assets between custody banks.

"On its face, it appears that the Proponents may have sold their shares and repurchased them on the following day," Exxon's lawyer wrote in a letter to the SEC. Stringer's office cited an email from State Street Corp showing the shares were transferred to it from Bank of New York Mellon Corp.

Exxon declined to comment.

A Chevron spokesman said it believed the New York proposal did not comply with rules, but said it will be on the company's proxy statement.

A Southern spokeswoman said it will keep evaluating proxy access matters and welcomes shareholder engagement.

An AES spokeswoman said its request to the SEC was an ordinary business filing. AES will include the New York proposal on its proxy as well as a slightly different version backed by management, she said.

(Reporting by Ross Kerber; Editing by Richard Valdmanis, Bernard Orr)

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