FT: Kate Burgess and Jeremy Grant on U.S. Corporate Governance

Flaws in the legal structure underlying U.S. corporate governance:

FT.com / Companies / Financial services: Investors "lack basic rights" on US boards By Kate Burgess in London and Jeremy Grant in Washington Published: October 27 2006 22:40 | Last updated: October 27 2006 22:40: Some of the world's largest investment managers have called on US regulators to give shareholders power to change the composition of US boards, claiming shareholders in US companies "lack basic rights which they take for granted in other developed countries%."

The call is a sign that one of the key tenets of US corporate governance -- limited shareholder access to company proxies for board elections -- is coming under attack from non-US investors as foreign ownership of US companies grows. In a letter to Christopher Cox, chairman of the Securities and Exchange Commission, the group calls on the regulator to allow investors to vote on the election of directors to "encourage more responsive and responsible boards" in the US. This might help to prevent recurrences of the "dismaying number of corporate scandals and board-level derelictions of duty in recent years" suffered by shareholders in US companies, it said....

Signatories of the letter... the group manages about $34,000bn in assets.

The move follows the delay this month of a key SEC meeting that was to address whether to allow shareholders more access to company proxies, one of the most sensitive issues on Mr Cox's agenda.The SEC was to have decided whether to let stand a recent US court ruling that had forced the regulator to reconsider its policy that blocked shareholder access to proxies where elections of board directors were concerned.

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