SEC chief seeks investors' input on rules

Executive stock options would need approval by shareholders

January 14, 2001|By BLOOMBERG NEWS

WASHINGTON - In a letter to large investors and investor groups, Securities and Exchange Commission Chairman Arthur Levitt is urging them to press the Nasdaq stock market to require listed companies to get shareholder approval before awarding executive stock options.

Levitt's letter was the first time he has spurred investors to participate in a rule proposal by Nasdaq or any other self-regulatory group, SEC spokesman John Heine said.

"Fundamental fairness requires that shareholders have the ability to approve stock option plans that include option grants for officers and directors," Levitt said in the letter sent last week.

Levitt, 69, has said he's likely to retire by the end of the month, ending his 7 1/2 -year tenure.

Currently, companies listed on Nasdaq or the New York Stock Exchange can set up option plans without shareholder approval if awards are made to a broader group of employees than just top executives.

Nasdaq, the second-largest U.S. stock market, is seeking comment from listed companies on whether they should be required to seek shareholder approval for these plans.

Many Nasdaq-listed technology companies that commonly give options to their employees have opposed a requirement.

"Our business must have a competitive stock-option program to attract and retain talent," said Anthony Muller, chief financial officer of San Jose, Calif.-based JDS Uniphase Corp., the No. 1 maker of fiber-optic components. "It's virtually impossible for shareholders to have the necessary insight and sensitivity to labor markets that are so critical to the company."

Levitt urged investors to write to Nasdaq before its comment period ends Feb. 5.

"It's a way to influence an issue he cares about, after he's gone," said Ed Fleischman, a New York lawyer who was an SEC commissioner from 1986 to 1992.

Recipients of Levitt's letter included Berkshire Hathaway Inc. Chairman Warren Buffett, the Consumer Federation of America, and the Council of Institutional Investors, said Chris Ullman, an SEC spokesman.

Levitt has urged investors before to weigh in on rule proposals before the SEC, such as a plan to require mutual fund companies to write prospectuses in plain English, Ullman said.

"Chairman Levitt has hit the nail on the head," Nasdaq spokesman Scott Peterson said.

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