Rewarding publicly traded firms for decreasing shareholder value - NYT

U.S. Securities and Exchange Committee rules are rules:

As it turned out, AMR has performed so poorly in the last few years - the price of its stock has fallen about 70 percent since mid-2001 - that Mr. Chevedden's 100 shares are now worth just $900. And that is well below the $2,000 minimum stake the S.E.C. says a shareholder must have if he or she wants to make a proxy proposal.

AMR asked the regulators for permission to exclude Mr. Chevedden's suggestion for that reason. The company even provided evidence of how weak its stock has been lately.

Last month, Mr. Chevedden complained to regulators that AMR was "implicitly bragging about the declining price" of its stock, and he appealed to their sense of fairness. He asked them not to use the ownership requirements to "disenfranchise long-term continuous shareholders" simply because "the company stock price has sunk."

But rules are rules, so the commission sided with AMR. An AMR spokesman said that the company had no choice but to disqualify Mr. Chevedden.

Not just a one time instance:

His 72 shares of Sabre, worth more than $3,500 when he acquired them five years ago, had declined to about $1,500 by late 2003.

After Sabre's lawyers decided to disqualify him, Mr. Chevedden appealed to regulators, arguing that the rule being cited was not intended "to reward a company for a decline in its stock price in a rising market." The regulators were unmoved.

In both cases, Mr. Chevedden would have qualified if the commission had not raised the minimum ownership requirement to $2,000 in the late 1980's.