BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2752|
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THIRD READING
Bill No: AB 2752
Author: Chu (D), et al
Amended: 8/17/04 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-2, 6/22/04
AYES: Escutia, Cedillo, Ducheny, Kuehl, Sher
NOES: Morrow, Ackerman
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 46-30, 5/20/04 - See last page for vote
(may not be relevant)
SUBJECT : Corporations: elections
SOURCE : Secretary of State
DIGEST : This bill enacts the Corporate Elections
Disclosure Act of 2004. This bill requires a publicly
traded domestic corporation or foreign corporation, as
defined, to file a copy of its corporate election
procedures with the Secretary of State, and to make them
available to a shareholder upon his or her written request
to the corporation's investor relations department.
Senate Floor Amendments of 8/17/04 change the name of the
act created by the bill from the "Corporate Elections
Fairness Act of 2004" to the "Corporate Elections
Disclosure Act of 2004." This change reflects amendments
the author has taken to the bill during the legislative
CONTINUED
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process that have made the bill a disclosure bill rather
than a bill regulating corporate election procedures.
ANALYSIS : Existing law provides for the creation of
California corporations upon the filing of articles of
incorporation setting forth basic information on the
corporation, its purpose, an agent for service of process,
and other very basic information about share classes and
rights. [Corporations Code Sec. 100 et seq.]
This bill requires publicly traded California corporations
to have in place a process for its shareholders to
recommend candidates for election as directors.
Existing law requires "publicly traded" foreign and
domestic for-profit corporations to file annual statements
with the Secretary of State disclosing specified
information, including, but not limited to information
about the corporation's auditor, its executives'
compensation, bankruptcies and convictions against its
directors or officers, and large securities law judgments
against the corporation. [Corporations Code Sec. 1502 and
2117.]
This bill enacts the Corporate Elections Disclosure Act of
2004.
This bill requires domestic and foreign corporations
qualified to transact interstate business to file a copy of
their shareholder recommendation processes with the
Secretary of State and again whenever they are changed or
amended.
This bill requires corporations to make available a copy of
their shareholder recommendation procedures upon
shareholder request to the investor relations department of
the corporation.
For purposes of this section, the following definitions
shall apply:
1."Corporate election procedures" means those portions of
the corporation's articles of incorporation and bylaws
that relate to the nomination and election of the
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corporation's directors.
2."Publicly traded domestic corporation or foreign
corporation" means a corporation that is an issuer, as
defined in Section 3 of the Securities Exchange Act of
1934 as amended (15 U.S.C. Section 78c), and has at least
one class of securities listed or admitted for trading on
a national securities exchange or on the National or
Small-Cap Markets of the NASDAQ Stock Market or on the
OTC-Bulletin Board or on the electronic service operated
by Pink Sheets, LLC. This term does not include a foreign
association.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/17/04)
Secretary of State (source)
American Federation of State, County, and Municipal
Employees (AFSCME)
California Labor Federation, AFL-CIO
California Professional Firefighters
California School Employees Association (CSEA)
CalPERS Board of Administration
CalSTRS
Greenlining Institute
OPPOSITION : (Verified 8/17/04)
Committee of Concerned Shareholders
Corporations Committee, Business Law Section, State Bar of
California
Department of Corporations
ARGUMENTS IN SUPPORT : This bill is sponsored by the
Secretary of State's office, that writes:
Free and fair elections are an essential component of
our democracy but they are far from the norm in
corporate America. Many corporations limit
shareholder access to proxy statements and force
shareholders interested in nominating their own slate
of directors to pursue costly proxy contests. Since
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these policies vary from corporation to corporation it
is important that shareholders are made aware of
corporate practices that may thwart or limit efforts
to improve director performance and accountability
through the nomination of alternate directors. Other
proponents indicate the bill enhances investor
confidence by assisting shareholders in their efforts
to have a greater say in the operation of their
investments.
ARGUMENTS IN OPPOSITION : The Department of Corporations
states:
This bill is unnecessary. As explained in a recent
news article regarding AB 2752, "Anyone seriously
considering nominating a director candidate would know
to review the bylaws and articles of incorporation,
and know that the documents are already available on
the SEC's Edgar website." Because the bill is
unnecessary and duplicates ongoing efforts of the
federal Securities and Exchange Commission (SEC), the
Department of Corporations recommends that the sponsor
coordinate with the SEC to help educate and inform
shareholders. Requiring the filing of additional
documents that are already available to the public
will undoubtedly divert some of the Secretary of
State's staff time and attention away from its core
responsibility to assist businesses in organizing in
California. California needs to focus its precious
resources in attracting new businesses, rather than
creating more red tape.
ASSEMBLY FLOOR :
AYES: Berg, Bermudez, Calderon, Chan, Chavez, Chu, Cohn,
Corbett, Correa, Cox, Dutra, Dymally, Firebaugh, Frommer,
Goldberg, Hancock, Jackson, Kehoe, Koretz, Laird, Leno,
Levine, Lieber, Liu, Longville, Lowenthal, Maldonado,
Matthews, Montanez, Mullin, Nakano, Nation, Negrete
McLeod, Parra, Pavley, Reyes, Ridley-Thomas, Salinas,
Simitian, Steinberg, Vargas, Wesson, Wiggins, Wolk, Yee,
Nunez
NOES: Aghazarian, Bates, Benoit, Bogh, Campbell,
Canciamilla, Cogdill, Daucher, Dutton, Garcia, Harman,
Haynes, Shirley Horton, Houston, Keene, La Malfa, La
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Suer, Leslie, Maddox, McCarthy, Mountjoy, Nakanishi,
Pacheco, Plescia, Richman, Runner, Samuelian, Spitzer,
Strickland, Wyland
NO VOTE RECORDED: Diaz, Jerome Horton, Maze, Oropeza
RJG:nl 8/18/04 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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