Back in 2007, Apache (NYSE: APA ) CEO Steven Farris wrote to the SEC, voicing his opposition to a proposal to give shareholders easier access to corporate proxies. It is an impassioned defense of the status quo, casting corporate governance advisory firms and activist investors/hedge funds as a threat to American-style capitalism, and even our energy security.
For several years, Apache and other companies have been furiously trying to fend off shareholder proposals filed by a California retiree named John Chevedden. The man is ubiquitous, cropping up in the proxy filings of companies as diverse as General Electric (NYSE: GE ) , Bank of America (NYSE: BAC ) , Ford (NYSE: F ) , and Hewlett-Packard (NYSE: HPQ ) . Chevedden has pushed various companies to separate the roles of CEO and Chairman, adopt simple majority vote standards, and give 10% shareholders the power to call special meetings. This year, Apache pushed back.
On January 8, Apache sued Chevedden in federal court, seeking not only to exclude Chevedden's latest shareholder proposal from the 2010 proxy, but also reimbursement for its legal expenses if successful. Usually, companies just ask SEC staff to issue a no-action letter, which is generally sufficient to keep a proposal from making it onto the proxy. Side-stepping the SEC and taking this matter directly to the courts was a novel, and much more expensive, move.
By the way, the offending proposal in question, urging a simple majority voting standard, is non-binding, meaning that the company could legally ignore it. In his 2007 letter, Mr. Farris urged the SEC to abolish non-binding shareholder proposals, such as the so-called "say on pay" proposals adopted by firms like Cisco (Nasdaq: CSCO ) in recent years. That hasn't happened, so Apache is taking a different tactic to shut down this perceived nuisance. Sticking shareholder activists like Chevedden with large legal bills, after outmaneuvering them on some technicalities in court, could derail this movement in a hurry.
Apache based its whole case on the notion that Chevedden hadn't proved that he was a shareholder of the company. I won't go into the arcane details, but this case is about as ridiculous as the one in which Chevedden was blocked by American Airlines parent AMR (NYSE: AMR ) on the grounds that the company's stock price decline had pushed him below the minimum share ownership threshold.
On Wednesday, a judge ruled narrowly in favor of Apache, finding that Chevedden's submission of a letter from his broker did not meet the requirements of proof of stock ownership. The judge did not award attorney's fees to Apache, so Chevedden lives to fight another day. For us little guys, I believe that's a very good thing.