Pacific Enterprises Changes Voting; Candidate Blocked

Shareholders of Pacific Enterprises voted Thursday to change the way they elect directors, virtually dooming any chance a maverick shareholder and union representative might have of succeeding in his second run at the board of the Los Angeles company, which owns Southern California Gas and Thrifty Corp.

At a special shareholders meeting marked by sharp exchanges, nearly 70% of the company’s outstanding common and preferred shares were voted to abolish cumulative voting, a system under which a small group of stockholders can gang-vote their shares for one candidate and greatly improve the chances of electing him or her to the board of directors. Nearly 49.2 million shares, or 89% of the shares that were voted, supported the change.

Union representative Sam Weinstein, who nearly made it to Pacific Enterprises’ board last year with the help of cumulative voting, said he hasn’t given up.

As allowed by a new state law, Pacific Enterprises proposed switching to the more conventional system of majority voting, under which the holder of each share may vote for one candidate for each of the 15 seats on the board. Under cumulative voting, a shareholder could cast all 15 votes for one candidate, which Pacific Enterprises argued could result in the election of a director representing a special interest group or could make the company more vulnerable to a hostile takeover.

“What are you afraid of?” one union member asked Pacific Enterprises Chairman James R. Ukropina during the meeting.

“I have to stop shaking in my boots before I make this comment,” Ukropina replied. “This is not a matter involving one person,” he continued. “Our concern is not about a particular party but a particular principle.

“We are afraid that if you have a person in the board room that represents a certain group of shareholders,” then that person won’t represent all shareholders as required by law, Ukropina said.

Weinstein, who based his 1989 campaign on the contention that Pacific Enterprises’ diversification had caused the company’s stock price to drop, accused the board of “insulating itself from shareholder pressures.”

Weinstein, Western regional director of the Utility Workers of America union, said after Thursday’s meeting that he and his supporters are studying ways to reinstate cumulative voting so that they can elect a union representative to the board. However, Weinstein said he is not sure whether he will run for the board again at the company’s annual meeting in May.