Shareowner proposal revision submitted to Equus II on March 11, 2001:


WHEREAS Equus II currently trades at a relatively deep discount to net asset value;

WHEREAS many shareowners lack the time and expertise to make intelligent voting decisions, yet recognize management’s recommendations may be tainted by conflicts of interest;

WHEREAS proxy advisory firms have established reputations for sound independent advice, with their recommendations sometimes dramatically increasing institutional votes in opposition to management;

WHEREAS shareowners have a common interest in obtaining sound independent advice, but often insufficient private interest to justify paying for it individually (the "free-rider" problem);

THEREFORE BE IT RESOLVED that Equus II shareowners request the Board of Directors to hire a proxy advisory firm, chosen by shareowner vote. Shareowners request the Board to enact this resolution in time to hold the vote at the year-2002 shareowner meeting, with the following features:

  • To insulate selection from Company management influence, any proxy advisory firm could put itself on the proxy by:
    • paying an entry fee,
    • declaring the price ($5000 limit) for advisory services for the coming year, and
    • providing the address of a website describing their proposed services and qualifications.
  • The winning advisor would be paid its declared price by the Company, and would make advice freely available to all Company shareowners for the subsequent year on all matters put to shareowner vote, except director elections (excluded to satisfy SEC rule 14a-8(i)(8)).
  • Advice could relate to such matters as open-ending or liquidation, mergers, stock option plans, and shareowner proposals.
  • Summary advice could be included in the Company proxy, with references to a website and/or a toll-free phone number for more detail.
  • Performance of the advisory firm would not be policed by Company management, but rather by gain or loss of the advisor’s reputation with shareholders.
  • The decision of whether to hire proxy advisory firms in later years would be decided by future shareowner votes.

Supporting Statement:

Like the Company’s external auditor, the proxy advisor should be paid with Company funds, giving shareowners an independent professional opinion. Independence is further enhanced when shareowners choose the advisor.

The conflicts of interest betwen managers and shareowners are described in Robert Monks and Nell Minow’s 1996 book Watching the Watchers, along with shareowners’ "free rider" and "rational ignorance" problems.Proxy Advisor Proposal FAQ

Proxy advisory firms such as Proxy Monitor (, Institutional Shareholder Services (, and Investor Responsibility Research Center ( are frequently cited in the financial press. Examples are "Venator Holders Are Urged To Support Dissident Slate" (Wall Street Journal 07/06/1999) and "ISS's Influence Grows In Proxy, Option Matters" (Wall Street Journal 11/10/1997).

Articles discussing the company-pay system for proxy advice and developments that may follow are on the Corporate Monitoring website ( General background materials on corporate governance can be found at Corporate Governance ( and The Corporate Library (

Submitted to Equus II by shareowners Jim McRitchie and Myra Young. Appeared in the 2001 proxy, and earned a 17.8% "YES" vote at the May 3, 2001 annual shareowners' meeting.