Greenbackd

In Now a baker’s dozen in North Dakota, footnoted.org’s Michelle Leder tracks the small, but growing number of companies whose shareholders are requesting via the annual proxy process that their companies relocate to North Dakota:

Last week, 11 companies, including Exxon Mobil (EOM), Southwest (LUV), and Amgen (AMGN), were on the list. But since Friday, two more companies have been targeted, which makes it a baker’s dozen. Over the past two days, shareholder activist John Chevedden, who has introduced proposals at Southwest and two others, added Continental Airlines (CAL) and Staples (SPLS) to his list.

The rush is on because the corporations law in North Dakota is intended to be much friendlier to shareholders. Shareholders in North Dakota can expect the following (from the 2007 press release announcing the bill):

· Majority voting in election of directors. In an uncontested election of directors, shareholders have the right to vote “yes” or “no” on each candidate, and only those candidates receiving a majority of “yes” votes are elected.

· Advisory shareholder votes on compensation reports. The compensation committee of the board of directors must report to the shareholders at each annual meeting of shareholders and the shareholders have an advisory vote on whether they accept the report of the committee.

· Proxy access. The corporation must include in its proxy statement nominees proposed by 5% shareholders who have held their shares for at least two years.

· Reimbursement for successful proxy contests. The corporation must reimburse shareholders who conduct a proxy contest to the extent the shareholders are successful. Thus, if a shareholder conducts a proxy contest to place three directors on a corporation’s board and two of the candidates are elected, the shareholder will be entitled to reimbursement of two-thirds of the cost of the proxy contest.

· Separation of roles of Chair and CEO. The board of directors must have a chair who is not an executive officer of the corporation.

As we’ve discussed previously, Carl Icahn is a supporter of North Dakota’s initiative, and has even proposed a federal law that allows shareholders to vote by simple majority to migrate a company from its state of incorporation to more shareholder-friendly states, including North Dakota. At present, that power is vested in boards, which means that even if the proposal passes, the boards must embrace the proposal before it is binding on the company. Leder thinks this means it’s unlikely that the companies will up stakes for North Dakota, but it’s interesting to watch.