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Congress, prosecutors, and the courts all went to bat for shareholders after the recent corporate scandals. Now investors are taking matters into their own hands by filing a record number of proxy proposals. So far this year more than half of the nation’s 2,000 largest public companies have been hit with shareholder resolutions, according to the Investor Responsibility Research Center, an independent research firm based in Washington, D.C. A total of 1,082 proposals have been filed this year, compared with approximately 800 in 2002. And not only are more proposals being filed � more are being passed. By the end of May, more than 125 had won the votes of a majority of shareholders. About 150 proposals were expected to win shareholder approval this year, or 50 percent more than in 2002, itself a record year. The impact of these resolutions is limited, however, because they’re nonbinding. If shareholders approve a proposal, it must be considered by the company, but management doesn’t have to enact it. Still, a number of investors report that they’ve had success in getting their ideas adopted. About three-quarters of the resolutions filed this year concern corporate governance (the rest deal with social and environmental issues). Proposals attacking executive compensation have gone up threefold: some 324 so far this year, up from 106 the previous year. Other popular resolutions, according to Todd Mason, a partner at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, include calls for splitting the offices of CEO and chairman and getting offshore companies to reincorporate in the United States. Companies often ignore these resolutions, however. At Apple Computer, Inc., for instance, 56 percent of shareholders approved a proposal to expense stock options. The company’s directors first said they would adopt the proposal, but then reneged. In fact, among the dozens of companies hit with a proxy resolution to curtail executive pay packages, not a single one has adopted it, according to IRRC marketing director Michelle Soule. Still, experts say that a proxy proposal can put pressure on management. According to Soule, the strategy works because companies would prefer to avoid an embarrassing showdown with their shareholders. The New York�based Teachers Insurance and Annuity Association-College Retirement Equities Fund, for example, reported that it wrote to some 25 companies earlier this year, raising a variety of concerns regarding corporate governance and executive pay. About 15 agreed to adopt the suggested changes. TIAA-CREF then filed shareholder proposals against the remaining 10. Most of these companies subsequently agreed to changes, leaving just two proposals � at Siebel Systems Inc. and SBC Communications Inc. � on the table. The Calvert Group, a socially responsible investment firm based in Bethesda, Maryland, has had similar success with its proxy proposals. The firm reports that out of the 20 resolutions it filed this year, 7 were withdrawn after the companies agreed to make the changes. Schering-Plough Corp., for example, agreed to increase the number of independent directors on its board in response to a Calvert-sponsored proposal. As the proxy season draws to a close, shareholder activists are turning their attention to the ultimate prize � the right to nominate their own candidates to the board of directors, a power they lack under the current federal regime. Securities and Exchange Commission chairman William Donaldson announced this spring that the agency planned to conduct “a thorough review of the proxy rules and regulations to ensure that they are serving the best interests of today’s investors.” The SEC is gathering public comments, and its staff was due to issue an internal report and recommendations by July 15.

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