I've argued for a long time that shareholders should not and cannot effectively wield power in US corporations (see, e.g., The Case for Limited Shareholder Voting Rights, in which the operative word is limited). This post by Dale Oesterle leaves me more convinced that I'm right than ever:
Anyone interesting in evaluating shareholder power in American corporations must study CA Associates. The company, previously named Computer Associates, has had its executives (The CEO, CFO, and General Counsel) indicted for criminal fraud (they agreed to a Deferred Prosecution Agreement)in accounting manipulations, sued for civil fraud on the same grounds, seen its stock plummet, and is now unable to issue financial reports because of compensation shenanigans (the back-dating of options). Shareholders want the directors who oversaw the firm during the time of the troubles to be kicked off the board. The directors best and only defense ("I did not know") is not a defense to the charge that it was their job to know -- they failed as overseers and should be replaced. There are two directors still on the board who were on the board during all the trouble. They are up for re-election and will probably be re-elected. A large shareholder submitted a Rule 14a-8 shareholder resolution to have the two directors removed; the SEC staff supported the company's refuse to include the proposal on the company's proxy. The shareholder has a asked the full commission to review the staff no-action letter. Technical matters aside, it is a case study on how directors, who should be embarrassed and run off the board, are protected by the the current system of shareholder voting.
CA is the ultimate in low hanging fruit. If the shareholders can't pick off this one, their fecklessness will be roundly confirmed.
