April 03, 2002
EMC Proxy Card Leaves Shareowner Voters in the Dark
by William Baue
EMC apparently violated SEC regulations by omitting descriptions of two shareholder resolutions on
its 2002 proxy card, according to proposal filers and proxy voting experts.
On March 28, Massachusetts-based data management and storage systems manufacturer EMC Corporation (ticker: EMC) filed
its definitive proxy statement for its May 8, 2002 Annual Meeting. Shareowners that opted for
electronic notification have already received their proxy cards, and other shareowners will receive
their ballots by mail. The proxy card lists four proposals up for vote. The first two proposals,
offered by EMC's management, follow the standard protocol of briefly describing the issues
involved. Proposal 3 and Proposal 4, however, do not include any identifying description; each
appears simply as "Stockholder Proposal." In fact, the shareholder proposals address board
independence and diversity.
"This type of exclusion is definitely not common.
Frankly, I can't remember ever seeing a proxy containing this type of gross omission before," said
Robert Kellogg, director of policy for Proxy Voter Services (PVS), a division of Institutional
Shareholder Services (ISS). "[It] is more than unusual. It might even be unprecedented." ISS
provides impartial proxy voting and corporate governance services to more than 500 institutional
In order to distinguish between the two shareowner proposals, much
less identify the issues involved in each, shareowners have to consult the Proxy Statement, which
was not included with the electronic proxy card. Online, this requires navigation through several
hyperlinks and entering EMC's
website, then navigating through the Proxy Statement to locate the shareowner proposals.
Proposal 4, which asked EMC to commit to racial and gender diversity on its
board, was filed by the State of Connecticut Treasurer Denise Nappier, who acts as principal
fiduciary for the state's $20 billion public pension fund. Yesterday, Deputy Treasurer Howard
Rifkin sent a letter to the Alan Beller, director of the Division of Corporate Finance at the U.S. Securities and Exchange Commission (SEC). He
maintained that EMC's omission violated Rule 14a-4 of the Securities Exchange Act of 1934.
"Specifically, Rule 14a-4 requires the proxy card to 'identify clearly and impartially each
separate matter intended to be acted upon, whether or not related to or conditioned on approval of
other matters, and whether proposed by the registrant or by the security holder'," wrote Mr.
Rifkin. "No indication is given [on the EMC proxy card] regarding the subject matter of either
proposal, nor is the stockholder referred to the Proxy Statement for more information. This
identification is neither clear nor impartial."
EMC Manager of Global Investor Relations
Michael Mahoney cited the same SEC regulation to confirm the company's compliance.
SEC requires that each matter be 'clearly and impartially' identified on the proxy card. Our proxy
card does so," Mr. Mahoney said. "There are no omissions. Each proposal is identified in our
proxy card exactly as it is identified in our proxy statement. Voting stockholders should read the
text of the proxy statement to obtain an understanding of the proposals and the issues addressed."
proxy card follows standard protocol for Proposal 2--offered by EMC's management--by including a
one-sentence description. Proposals 3 and 4--shareowner resolutions on board diversity and
independence, respectively--include no such description, which is "unprecedented," according to one
Mr. Kellogg concurred with Mr. Rifkin that the proxy
card seemed to violate SEC rule 14a directly. He also agreed with Mr. Rifkin's opinion that the
SEC should require EMC to revise its proxy card by providing a brief summary of issues involved in
the shareowner proposals.
Mr. Kellogg also placed the incident in the larger context of
EMC's tarnished history of shareowner relations. For example, at EMC's 2001 annual meeting, the
company shifted from the open question-and-answer format implemented by most companies, where
shareowners ask questions directly from the floor, to requiring shareowners to submit questions
beforehand. This policy raised concern of the potential for board and management censorship of
questions. Indeed, EMC chose to exclude a question regarding diversity, the same issue excluded
from this year's proxy card.
"Given EMC's lackluster governance track record, if nothing
else this raises eyebrows regarding the board's and management's commitment to the ideal of full
transparency," said Mr. Kellog. "This unfortunate occurrence only reinforces the legitimate
concerns previously raised by many institutional investors over the company's problematic corporate