BILL ANALYSIS
AB 2752
Page 1
GOVERNOR'S VETO
AB 2752 (Chu)
As Amended August 17, 2004
2/3 vote
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|ASSEMBLY: |46-30|(May 20, 2004) |SENATE: |21-14|(August 19, |
| | | | | |2004) |
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|ASSEMBLY: |54-24|(August 25, | | | |
| | |2004) | | | |
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Original Committee Reference: B. & F.
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.
The Senate amendments :
1)Change the name of the Corporate Elections Fairness Act of
2004 to the Corporate Elections Disclosure Act of 2004.
2)Define "corporate election procedures" as those portions of
the corporation's articles of incorporation and bylaws that
relate to the nomination and election of the corporation's
directors.
3)Delete the requirement that domestic corporations must post
their corporate election procedures on their Web site.
4)Make other technical changes.
AS PASSED BY THE ASSEMBLY , this bill required a:
1)Publicly traded company, as defined, to have in place a
process for its shareholders to recommend a candidate or
AB 2752
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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.
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: 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
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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
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.
GOVERNOR'S VETO MESSAGE :
I am returning Assembly Bill 2752 without my signature
as it places a new, unnecessary filing requirement on
California business.
This bill requires domestic and foreign corporations
to file a copy of their corporate election procedures
with the California Secretary of State. The bill
would also make a copy of the procedures available to
the companies' shareholders upon request.
This bill is unnecessary, as any corporation's bylaws
and articles of incorporation, including its elections
procedures, are available to the public through the
Securities and Exchange Commission (SEC).
I encourage the author and sponsor to work with the
SEC to make this information easier for investors to
find, without placing a new filing requirement on
companies seeking to do business in California.
Analysis Prepared by : Margaret Gladstein / B. & F. / (916)
319-3081
FN:
0009150