U.S. investor activism gains momentum amid crisis

By Martha Graybow

WASHINGTON (Reuters) - U.S. big businesses are being pushed by lawmakers and regulators to expand shareholder democracy in the wake of the financial crisis -- with executive pay and board of director elections the main areas where changes soon could be on the way.

Attendees at the Reuters Global Financial Regulation Summit in Washington this week said corporate governance reform efforts are gaining traction as angry investors respond to financial industry bailouts, sunken stock portfolios and widespread job losses.

Not everyone thinks proposed changes are a good move. While some say bailed-out companies should be subject to pay caps and other oversight, they do not want a raft of new restrictions expanded to other companies.

"If you're a profit-making organization, we shouldn't have anything to do with the management of it," U.S. Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, told the Reuters summit.

Investors showed their anger on Wednesday with one of the most well-known recipients of taxpayer money -- Bank of America Corp (BAC.N), which needed a $20 billion bailout to absorb its acquisition of troubled Merrill Lynch & Co.

Bank of America shareholders voted to strip Chief Executive Kenneth Lewis of power by replacing him as chairman of the board in a sign of their discontent. Such moves are rare in Corporate America, and often are precursors of an executive's eventual ouster from the company.

With shareholders demanding more accountability from big companies, the U.S. Securities and Exchange Commission is expected to revisit a proposal to make it easier for investors to nominate directors to corporate boards.

Business groups do not like the idea, saying it could lead to fringe interests obtaining board seats. But new SEC Chairman Mary Schapiro told the Reuters summit that she is convinced that expanding so-called "proxy access" makes sense and expects the commission to circulate a proposal as soon as next month.