Monday, March 29, 2010

Cascade Financial

Craig Skotdal, one of the twelve directors of Cascade Financial, is unhappy with his fellow members.

Twelve sounds like an unwieldy size for a corporate board, but so far as I can tell yet that is not one of Skotdal's points. Rather, he is unhappy because his fellow board members don't know enough about banking (Cascade is the 8th largest community bank in Washington State) and as a consequence they are too subservient to bank management.

Skotdal has put forward his own slate: three nominees whose presence on the board would improve this situation: Tom Rainville, Arnold Hoffman, and Christian Sievers. The next annual meeting takes place next month.

David Duce, who chairs the corporate governance and nomination committee of the board, has sent a rather snippy letter to Skotda's lawyer, Gary F. Linden, expressing wonder that these candidates were willing "to be interviewed only as a group and only with your law firm present. As Mr. Skotdal is well aware, this is not consistent with the Nominating Committee's practices for evaluating board light of your clients' recent actions, the disregard for procedures with which Mr. Skotdal is charged as a sitting Director with enforcing, and the lack of cooperation we have received in trying to assess the qualifications of your candidates, we are left to conclude you have no interest in working cooperatively."

In news that may be related, the SEC also recently refused Cascade's request for a no-action letter, in connection with a shareholder proposal submitted by Ed C. McRory. [A no-action letter is a more-or-less informal green light for a contemplated corporate action. A corporation asks the agency -- if we do X, can we proceed on the understanding you will take no enforcement action? So in this case the SEC said that it could not proceed on that understanding.]

Ed McRory, a shareholder, wants the next meeting to vote on a resolution requesting a compensation policy that "restricts the future granting, enlargement or enhancement of any golden parachute plan...."

Cascade, in a letter December 29, 2009, asked for no-action go-ahead concerning its planned exclusion of this proposal from the proxy materials, because it is (a) vague and indefinite, (b) relates to the company's ordinary business operations, and (c) has already been substantially implemented.

In a response March 4, 2010, the SEC said that it does not believe that the proposal is vague, or that it has been substantially imlemented. Accordingly, it can not be omitted from proxy materials on either of those grounds. The case with the claim of "ordinary business operations" is a little more complicated. If the proposal is meant to apply only to "senior executive compensation," then it is not an interference with ordinary business relations, and this contention too fails. The company was required to give McRory a chance to amend the proposal making clear that it is so restricted, and it can proceed with its proposed exclusion if and only if he refuses to do so.

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