SEC Cautions Wal-Mart on Shareholder Surveillance

Responding to reports that Wal-Mart is investigating its shareholders who submitted proposals to be acted on at the company’s upcoming shareholder meeting, SEC Chair Christopher Cox emphasized that the right of shareholders to propose matters for consideration at annual meetings is an indispensable element of the federal securities laws. In a strongly-worded statement, he condemned any attempt by company fiduciaries to intimidate shareholders exercising these rights as antithetical to the core principles of corporate governance and the proper expression of shareholder rights.

The SEC chair was mainly reacting to a letter from New York City Comptroller William Thompson urging the Commission to investigate what the NYC official called Wal-Mart’s chilling and outrageous surveillance of those shareholders who introduced resolutions the company disagreed with. The Comptroller said that Wal-Mart senior managers have confirmed that the company considers this conduct to be justifiable and intends to continue these activities.

According to the Comptroller, Wal-Mart’s conduct raises significant questions regarding the company’s commitment to its shareholders, as well as to the public markets. Without prejudging what has occurred, Chairman Cox forwarded the Comptroller’s letter to the SEC’s New York Regional Office for appropriate action.