Mr Sidhu goes to Harrisburg

3 February 2006 By Antony Currie Follow @AntonyMCurrie

The Pennsylvania bank s boss has taken his fight with shareholders to his friends in the state’s political arena. It looks like he ll win. Governor Rendell should veto the bill that undermines shareholders rights. It s bad news for shareholders in all the state s companies.

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Pennsylvania's state congress passed a bill on Wednesday night amending current state company law. If signed by governor Edward Rendell, the bill will make it harder to unseat directors of Pennsylvaniaincorporated companies. It will also exempt shares acquired directly from a company from being counted as part of the state's 20% change of control hurdle.

Erik Arneson, chief of staff to the Senate majority leader, said our impetus was to help a Pennsylvania company fend off outside corporate maneuvering." He was referring to attempts by Sovereign's largest shareholder, Relational Investors, to oust Sovereign Bancorp chief executive Jay Sidhu and the board, and to prevent Sovereign from selling 25% of the company to Santander.

The bill was introduced to congress on Tuesday, the day after the judge in New York set a date of March 31st for the RelationalSovereign case.

Institutional Shareholder Services spokeswoman Cheryl Gustitus said: "It's unfortunate that Pennsylvania officials saw fit to put the interests of one Philadelphia bank ahead of the rights of all shareholders. This blatant abuse of legislative power is bad for investors, bad for the State of Pennsylvania and its people and, perhaps in the long run, will prove to be bad for the very officials who signed it into law."

Peter Langerman, chief executive of Franklin Mutual Advisors, Sovereign's secondlargest shareholder, said Pennsylvania risked becoming the burial ground for corporate democracy.

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