Heads of Largest Stock Exchanges Testify on `One Share, One Vote'

Article excerpt

WASHINGTON - The heads of the nation's two largest stock exchanges, said Tuesday they regretfully were prepared to let American corporations disenfranchise their stockholders to prevent hostile takeovers.

The chairmen of the New York and American stock exchanges told the Securities and Exchange Commission they believed in the principle of "one share, one vote," but said competition among the exchanges might pressure them to abandon the concept.

The testimony came as the SEC heard testimony on a petition by the NYSE to lift the "one share, one vote" requirement.

For 60 years, the Big Board has required all its listed companies to give holders of common stock equal voting rights. But corporate raiders have changed the "one share, one vote" principle from a platitude to a weapon by buying up common shares until they have control.

The spate of takeovers has prompted managers to prepare defenses, including limits on shareholder authority.

John Phelan, chairman of the NYSE, says his exchange cannot maintain the "one share, one vote" principle as a requirement for NYSE-listed corporations when companies seeking to dilute shareholder authority can move to competing exchanges without the rule.

Arthur Levitt Jr., the American Exchange chairman, said his exchange cannot hold to its weaker version of the rule if the Big Board is permitted to abandon the standard altogether.

And both chairmen blamed the National Association of Securities Dealers for failing to include any voting requirement on stocks traded in the over-the-counter market.

But NASD Chairman Gordan S. Macklin, testifying later, said, "there has been no evidence offered that would justify additional regulation" of over-the-counter stocks. He said 95 percent of stocks traded over the counter comply with the "one share, one vote" standard.

The proposed NYSE rule change would allow companies to issue two classes of common stock: one having limited or no voting power, and one with greater voting power. In practice, the former shares would be available for the general investing public, while the latter would be held by management and its allies.

The American Exchange allows its listed companies to issue two classes of common stock, but with limits. …