Four pension funds this week submitted a resolution that seeks to allow shareholder-nominated candidates to run for seats on Hewlett-Packard's board of directors.

This was the first proxy access proposal filed after a Sept. 5 federal court ruling that the Securities and Exchange Commission improperly allowed American International Group to omit a 2005 access resolution by the American Federation of State, County, and Municipal Employees Pension Plan (AFSCME).

The proposal at H-P was filed Sept. 25 by AFSCME, the New York State Common Retirement Fund, the Connecticut Retirement Plans and Trust Funds, and the North Carolina Retirement Systems. The resolution asks the company to change its bylaws to allow any shareholder group holding 3 percent of the shares outstanding for at least two years to nominate one or more directors. Collectively, the pension funds own more than 30 million H-P shares with a market value of $675.9 million, according to their press release.

"Proxy access is critical to insuring shareholder rights," New York State Comptroller Alan G. Hevesi said in a press release. "While we wait for the SEC to rule on this topic regarding all corporations, we are moving forward on a case-by-case basis to establish what should be a basic right for all shareholders."

H-P had no immediate comment on the shareholder proposal. The Palo Alto, California-based computer manufacturer has been embroiled in a controversy over a boardroom leak investigation authorized by former Chairman Patricia Dunn. Dunn resigned Sept. 22, two weeks after the company acknowledged that it hired a private investigator to obtain the phone records of directors and journalists. The SEC, federal prosecutors, and California Attorney General Bill Lockyer are investigating the company's handling of the leak probe, while U.S. lawmakers are holding hearings on the matter.

"The H-P board is completely dysfunctional and has been for a long time, which is an example of why shareholders have fought so hard for proxy access," Richard Ferlauto, AFSCME's director of pension investment policy, told Governance Weekly. "We seek to nominate directors at H-P who will make the board do its job better through an election process that is not stacked against investor interests."

The SEC has scheduled a meeting on Oct. 18 to review its rules on shareholder proposals concerning board elections. Given the lack of time before filing deadlines for the 2007 season, the SEC is not likely to revive a controversial 2003 draft rule that would have established procedures to allow shareholders to nominate directors. While Ferlauto has expressed hope that the SEC will allow shareholders to file proxy access proposals at individual firms, other observers, including Gordon Smith, a law professor at the University of Wisconsin, warn that the agency may revise its rules to bar such resolutions.