BILL ANALYSIS
AB 2752
Page 1
ASSEMBLY THIRD READING
AB 2752 (Chu)
As Amended April 28, 2004
Majority vote
BANKING AND FINANCE 10-0 APPROPRIATIONS 20-0
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|Ayes:|Wiggins, Bogh, Calderon, |Ayes:|Chu, Runner, Bates, Berg, |
| |Chavez, Correa, Cox, | |Calderon, Corbett, |
| |Houston, Montanez, | |Correa, Daucher, |
| |Negrete McLeod, Vargas | |Firebaugh, Goldberg, |
| | | |Keene, Leno, Nation, |
| | | |Negrete McLeod, Oropeza, |
| | | |Pavley, Ridley-Thomas, |
| | | |Wesson, Wiggins, Yee |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires publicly traded corporations to have a process
in place for its shareholders to recommend a candidate for
election as director. That process must be filed with the
Secretary of State (SOS) and made available to shareholders.
Specifically, this bill requires a:
1)Publicly traded company, as defined, to have in place a process
for its shareholders to recommend a candidate or candidates for
election as directors. This process shall be known as its
corporate election procedures.
2)Domestic or foreign corporation, other than a foreign
association, qualified to transact interstate business to file a
copy of its corporate election procedures with the SOS within
120 days after the end of fiscal year 2004-05 or within 120 days
of the effective date of this section, whichever is later, and
again whenever the corporate election procedures are changed or
amended.
3)Corporation to make available a copy of its corporate election
procedures upon written request of any shareholder.
4)Domestic corporation that has a Web site to disclose its
corporate election procedures on its Web site.
EXISTING LAW establishes:
AB 2752
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1)That directors of a corporation elected to hold office at an
annual meeting shall hold office until the next annual meeting
unless the corporation adopts provisions to divide the board of
directors into two or three classes to serve for terms of two or
three years, respectively.
2)The General Corporation Law, which requires domestic and foreign
corporations to file statements annually with the SOS disclosing
specified information concerning their operations and makes the
information contained in the statements open to public
inspection. The California Corporate Disclosure Act of 2002
requires corporations to disclose additional information,
including information concerning their auditors, the
compensation paid to board members and securities law
violations.
FISCAL EFFECT : Minor, absorbable costs to the SOS.
COMMENTS : This bill requires publicly traded companies to file
their corporate election procedures with the SOS. It also
requires corporations to make those procedures available to
shareholders upon written request. California-based corporations
must post their procedures on the company Web site.
According to the sponsor, Secretary of State Kevin Shelley, and
the author, "Disclosure of a corporation's election procedures
will serve to educate and inform its current and potential
shareholders. Indeed, such disclosures will provide consumers
with a magnifying glass to judge the appropriateness of investing
in a corporation that may or may not provide shareholders with a
reasonable means to affect change."
Securities and Exchange Commission (SEC) proposed rule: The SEC
is currently considering adopting rules (Exchange Act Rules 14a-11
for Security Holder Director Nominations) that would require,
under certain circumstances, companies to include in their proxy
materials security holder nominees for election as director.
Under the proposed rules, if 35% of shareholders withhold a vote
against directors it would trigger a process that would give a
large investor or group of shareholders the right to place a
director on a company's proxy.
According to SEC, "These proposed rules are intended to improve
disclosure to security holders to enhance their ability to
AB 2752
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participate meaningfully in the proxy process for the nomination
and election of directors." If the proposed rules are adopted,
many corporations would be forced to change their election
procedures. Some argue this bill is premature and may increase
costs for businesses. However, this bill would ensure that
shareholders and potential investors have access to a
corporation's new election procedures as soon as they are adopted.
Analysis Prepared by : Margaret Gladstein / B. & F. / (916)
319-3081
FN: 0005336