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The American Federation of State, County and Municipal Employees Pension Plan has filed suit against American International Group (ÌìÃÀÍøÕ¾´«Ã½´«Ã½) in U.S. District Court for the Southern District of New York seeking to alter the process for adding directors to ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s board so that new leaders might be elected to run the insurer.

The AFSCME plan’s proposal would require ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to include a binding proxy access shareholder proposal on its proxy materials and bring the matter to a vote of shareholders at the company’s annual meeting in May.

If passed, the plan’s proposal would amend the company’s by-laws to allow shareholders future access to ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s proxy materials to nominate individuals to the company’s board of directors. The new by-laws would require ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to include the names and other information on candidates nominated by shareholders who own 3 percent or more of the company’s stock for at least one year.

The plan leadership said the suit was filed because the Securities and Exchange Commission has told ÌìÃÀÍøÕ¾´«Ã½´«Ã½ it could omit the AFSCME plan’s proposal and has itself failed to act to broaden shareholder access to the nominating process.

“We have no choice but to seek relief in the courts because of the current stalemate on proxy access rulemaking at the SEC. While we hope that Chairman Donaldson will be able to craft a meaningful shareholder access rule, the current situation at ÌìÃÀÍøÕ¾´«Ã½´«Ã½ demands action now,” said Gerald W. McEntee, chairman of the AFSCME Pension Plan.

McEntee, citing recent troubles ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has had with federal and state authorities, claimed that new leadership is needed at the giant company.

“ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s business practices — now under investigation by the New York Attorney General — put shareholders at risk for significant losses. We have lost faith in the current board dominated by Chairman and CEO Hank Greenberg and company insiders. Proxy access is one way for shareholders to bring fresh leadership to ÌìÃÀÍøÕ¾´«Ã½´«Ã½, empowered to set the company on a new path.”

Last fall, the AFSCME Plan filed proxy access proposals at a number of companies. SEC staff first allowed inclusion of the plan’s proxy access proposal at Disney, only to reverse itself a short time later. ÌìÃÀÍøÕ¾´«Ã½´«Ã½ subsequently requested a “no-action letter” from the staff. The SEC’s Division of Corporation Finance notified the AFSCME plan on February 14 that it had issued an advisory opinion to ÌìÃÀÍøÕ¾´«Ã½´«Ã½ that it could omit the plan’s proxy access shareholder proposal.

“We have always believed that proxy access proposals must be included by companies under the current shareholder proposal rule. For two years we believed that SEC, through its rulemaking, was going to establish a standard for all companies. We still look forward to that rule. We take this legal action today because we are committed to bringing proxy access by-laws to corporations who most need it like ÌìÃÀÍøÕ¾´«Ã½´«Ã½,” added McEntee.

Currently, only candidates that are nominated by an incumbent board of directors are included on the ballots that companies distribute to their shareholders. If shareholders want to nominate a candidate, companies are not required to mention the nominee or to include that candidate’s name on the ballot. Shareholders seeking to elect their own nominees must bear the significant expense of printing, distributing and collecting their own ballots, and other information. Corporate boards are free to spend unlimited funds to defeat such initiatives.

Last November, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ paid $126 million to settle probes by the U.S. Justice Department and SEC into sales of insurance policies allegedly designed to conceal two companies’ losses. On February 14, ÌìÃÀÍøÕ¾´«Ã½´«Ã½ revealed that it had been served by a new set of subpoenas by both New York Attorney General Eliot Spitzer and the SEC delving into ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s accounting of certain “assumed reinsurance.” In the past few months, four ÌìÃÀÍøÕ¾´«Ã½´«Ã½ employees have pleaded guilty to charges arising from Spitzer’s ongoing investigation of bid-rigging in the commercial insurance market.

Topics Lawsuits New York ÌìÃÀÍøÕ¾´«Ã½´«Ã½