[Federal Register Volume 62, Number 185 (Wednesday, September 24, 1997)]
[Rules and Regulations]
[Pages 49907-49908]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25262]
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FARM CREDIT ADMINISTRATION
12 CFR Part 615
RIN 3052-AB75
Funding and Fiscal Affairs, Loan Policies and Operations, and
Funding Operations; Cumulative Voting
AGENCY: Farm Credit Administration.
ACTION: Final rule.
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SUMMARY: The Farm Credit Administration (FCA), through the FCA Board
(Board), issues a final rule amending Sec. 615.5230 of its regulations
to provide that a Farm Credit Bank (FCB or bank) may eliminate
cumulative voting in director elections with the consent of 75 percent
of the bank's association shareholders. This rule is necessary because
the existing requirement of unanimous consent was unduly burdensome,
complicated, and provided questionable benefits. The effect of this
rule is to ease the unanimous consent requirement while maintaining
significant protection for the minority interests.
DATES: This regulation shall become effective October 24, 1997, during
which either or both houses of Congress are in session. Notice of the
effective date will be published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Gaylon J. Dykstra, Policy Analyst, Office of Policy Development and
Risk Control, Farm Credit Administration, McLean, VA 22102-5090, (703)
883-4498;
or
Rebecca S. Orlich, Senior Attorney, Office of General Counsel, Farm
Credit Administration, McLean, VA 22102-5090, (703) 883-4020, TDD (703)
883-4444.
SUPPLEMENTARY INFORMATION: The FCA proposed to amend Sec. 615.5230 of
its regulations on April 25, 1997 (62 FR 20131), to provide that an FCB
may eliminate the cumulative voting requirement for the election of
directors by a vote of 75 percent of the bank's association
shareholders.1 The proposed rule was in response to
petitions from several Farm Credit System (System) institutions
requesting that the FCA revise the existing unanimous consent
requirement for eliminating cumulative voting. The 30-day comment
period expired on May 27, 1997.
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\1\ Farm Credit System associations that are shareholders of an
FCB include Federal land bank associations, Federal land credit
associations, production credit associations, and agricultural
credit associations.
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The FCA received a total of eight comment letters. Five of the
letters represented seven associations (some commented jointly). The
other three were from the FCB of Wichita (transmitting comments of 10
of its affiliated associations); the FCB of Texas; and the Tenth
District Federation of Production Credit Associations (Federation),
whose members are affiliated with the FCB of Texas.
Nine associations and the Federation supported the proposed
amendment; seven associations opposed the proposed amendment. One
association requested that the FCA reconsider the recommendation of a
two-thirds majority made by several petitioners but supported the
proposed amendment if the FCA could not support the two-thirds
majority. The FCB of Texas stated that it believed that a simple
majority vote of all associations should control cumulative voting, but
that alternatively, the supermajority requirement should be based on
the number of associations that actually vote. Two institutions
specifically endorsed the proposal to accord each association one vote
in a vote to eliminate cumulative voting.
The associations that supported the proposed amendment generally
commented that the existing regulation was unduly burdensome,
complicated, and provided questionable benefits. One commenter stated
that the current regulation ``allows only one vote to void the wishes
of the remainder of the District who support a less restrictive consent
for change.''
Four associations that opposed the proposed amendment supported the
continuation of the existing regulation. They commented that the
original intent of the regulation was to provide smaller associations a
meaningful vote by allowing them to cumulate their votes in elections
and that this is now even more paramount because of the mergers,
consolidations, and proposed joint management agreements at the
district level. They further stated that it was important for all
stockholders in the district banks to have the maximum opportunity to
voice their respective votes and that there was ``no valid reason for
an association located in a smaller geographic size to forfeit this
right.''
After careful consideration of the comments, the FCA adopts the
rule as proposed. The FCA continues to believe that cumulative voting
provides important protection to minority interests and, consequently,
should not be subject to elimination by a two-thirds majority. The 75-
percent supermajority provides the proper balance among the differing
opinions by easing the unanimous requirement for eliminating cumulative
voting while maintaining significant protection for the minority
interests.
As noted above, one commenter stated that a supermajority
requirement should be a percentage of only the shareholders that
participate in the vote, rather than the total number of voting
shareholders. The effect of such a change would be the possibility that
a smaller number of shareholders would be able to eliminate cumulative
voting if some shareholders abstain. The FCA is not persuaded that such
a change is appropriate.
[[Page 49908]]
One respondent requested that the FCA clarify whether a 75-percent
vote is needed to reinstate cumulative voting. The FCA does not require
a supermajority to reinstate cumulative voting. The FCA believes that
such a vote should be subject to the amendment procedures established
by the FCB's bylaws.
List of Subjects in 12 CFR Part 615
Accounting, Agriculture, Banks, Banking, Government securities,
Investments, Rural areas.
For the reasons stated in the preamble, part 615 of chapter VI,
title 12 of the Code of Federal Regulations is amended as follows:
PART 615--FUNDING AND FISCAL AFFAIRS, LOAN POLICIES AND OPERATIONS,
AND FUNDING OPERATIONS
1. The authority citation for part 615 continues to read as
follows:
Authority: Secs. 1.5, 1.7, 1.10, 1.11, 1.12, 2.2, 2.3, 2.4, 2.5,
2.12, 3.1, 3.7, 3.11, 3.25, 4.3, 4.3A, 4.9, 4.14B, 4.25, 5.9, 5.17,
6.20, 6.26, 8.0, 8.3, 8.4, 8.6, 8.7, 8.8, 8.10, 8.12 of the Farm
Credit Act (12 U.S.C. 2013, 2015, 2018, 2019, 2020, 2073, 2074,
2075, 2076, 2093, 2122, 2128, 2132, 2146, 2154, 2154a, 2160, 2202b,
2211, 2243, 2252, 2278b, 2278b-6, 2279aa, 2279aa-3, 2279aa-4,
2279aa-6, 2279aa-7, 2279aa-8, 2279aa-10, 2279aa-12); sec. 301(a) of
Pub. L. 100-233, 101 Stat. 1568, 1608.
Subpart I--Issuance of Equities
2. Section 615.5230 is amended by revising paragraph (a)(2)(ii) to
read as follows:
Sec. 615.5230 Implementation of cooperative principles.
(a) * * *
(2) * * *
(ii) Have the right to vote in the election of each director and be
allowed to cumulate such votes and distribute them among the candidates
in the shareholder's discretion, except that cumulative voting for
directors may be eliminated if 75 percent of the associations that are
shareholders of the Farm Credit Bank vote in favor of elimination. In a
vote to eliminate cumulative voting, each association shall be accorded
one vote.
* * * * *
Dated: September 16, 1997.
Floyd Fithian,
Secretary, Farm Credit Administration Board.
[FR Doc. 97-25262 Filed 9-23-97; 8:45 am]
BILLING CODE 6705-01-P
