(Links added to proponent response below.)


The Board of Directors recommends a vote AGAINST approval of the Stockholder Proposal as the implementation of the proposal described above would not be in the best interests of the Corporation or you, our stockholders.2 In the opinion of the Board of Directors:

  • The Board consists of eight Directors, seven of whom are "independent directors" and one is a member of management. The directors are experienced individuals who are familiar with the Corporation's business and the markets in which the Corporation operates. The Board of Directors believes it is sufficiently independent of management to avoid conflicts of interest. Adding3 the advice of an outside firm (at the Corporation's expense) would not assist the Board or stockholders in furthering the Corporation's objectives or otherwise be in the stockholder's best interests.
  • The Board of Directors is committed to providing Corporation stockholders with useful voting recommendations and information on which to make voting decisions. The Board bases its recommendations on its knowledge of the Corporation, its strategic plans for the business and input from management and outside advisers. We do not believe adding the advice of an unsupervised4 firm at our expense would be in the interests of our stockholders.
  • This proposal calls for the Corporation to hire a proxy advisory firm without screening, input or review by the Board or management of the quality of the firm or its work product. Even our independent auditors are selected and reviewed by the Audit Committee. The Board of Directors does not believe it is in the best interests of our stockholders to spend funds to hire a proxy advisory firm without first evaluating the need for such advice5 and the quality of the firm's work6, its recommendations and the process by which such recommendations are made.
  • The proposal calls for the firm to be paid without regard to the reasonableness of this compensation for the work performed.7 While the proposal purports to cap the fees paid to the elected proxy advisory firms, we believe the actual costs of the proposal will be greater. We do not believe it is a good idea for us to abdicate our responsibilities to evaluate the engagement, services and compensation of outside advisers8, and do not believe we should provide an open forum in our proxy materials9 for an unknown and unsupervised firm.10
  • The Stockholder Proposal involves additional cost to the proxy process.11
  • There is a significant volume of published research and other literature regarding the Corporation and issues of importance to the Corporation's stockholders (made even more accessible by the Internet), and a proxy advisory firm would offer little marginal benefit in communicating with stockholders.12



The affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the stockholder proposal is required to approve the stockholder proposal, which is framed as a "recommendation" to the Board. An abstention is treated as being present and entitled to vote on the matter and, therefore, has the effect of a vote against the stockholder proposal.13 A broker "non-vote" is treated as not being entitled to vote on the matter and, therefore, is not counted for purposes of determining whether the stockholder proposal has been approved.


1. This is the Board of Directors' response, addressed to the Corporation's owners.  When discussing potential conflicts of interest between a corporation's owners and its board (as this Proposal does), it is confusing to refer to the board as speaking for the corporation.  I guess it's the Louis XIV model of governance: "L'état c'est moi."

2. This Proposal would make independent proxy voting advice available to all Oregon Steel shareowners, in competition with the board's advice in the company-paid proxy.  By thus reducing the Board's influence, it may not be in the best interests of the Board.

3. As the Board mentions here, the independent advisor's recommendation would add to, rather than replace, the Board's recommendation on which way to vote. So shareowners could benefit from both sources of advice.

4. Shareowners would choose the advisor based on its reputation in the financial community.  Thus the advisor would in effect be supervised by the financial community in maintaining its reputation.  Supervision by the Board would make the advisor no longer independent of the Board, so the Proposal rules out Board supervision.

5. Shareowners will evaluate the need for this independent advice when they vote on this Proposal.  We shareowners need independent voting advice for the same reason we need to have shareowner voting at all. If it were sufficient to simply vote following the Board's recommendations then we wouldn't need to vote, but instead could just leave all decisions to the Board. The reason why we have shareowner voting is that there would be conflicts of interest inherent in leaving all decisions to the Board.

6. The quality of the advisor's work will be evaluated by the financial community in determining the advisor's reputation, which will affect future shareowner votes and thus the advisor's future business.

7. The Proposal calls for each advisor candidate to declare its fee in advance.  Thus shareowners would vote to choose an advisor with regard to the reasonableness of its compensation for the work performed.

8. The Board could still evaluate the engagement, services and compensation of these outside advisors, and give recommendations to shareowners as to which advisor to select.  However, only shareowner vote would determine which advisor is selected and how much it is compensated.

9. I agree that the company proxy should not be an open forum. That is why the proposal calls for an entry fee, which can be adjusted to deter all but the serious candidates.

10. An advisor would have to be known to shareowners (by reputation) in order to win enough votes to be selected.  Advisors would be supervised by the financial community in determining reputation.

11. Paying an independent advisor would reduce the need for shareowners to spend money on other advisors, including the Board.

12. While there is much public information available about this company, it remains difficult for shareowners to decide on key proxy matters, such as the appropriate form and amount of executive compensation.  And the Board has different interests than the shareowners in such matters.

13. This is a well-placed reminder of a voting system biased against shareowners' interests and in favor of the incumbent Board's interests.  The Proposal would help shareowners vote more effectively, thus reducing such bias.


Response written by Mark Latham on April 6, 2004.