A trust reform group with a history of making noise in courtrooms and statehouses now wants to make inroads in the corporate boardroom.
Heirs Inc., a Villanova, Pa.-based organization, wants shareholders of three banking companies to vote this spring on a measure that would encourage their institutions to resign as corporate trustees if the beneficiaries were unhappy.
Standish H. Smith, the group's president, submitted proposals to Mellon Bank Corp., PNC Bank Corp., and CoreStates Financial Corp. to be included in their proxy statements this spring. Mr. Smith holds shares in the three Pennsylvania banks.
Under the proposed policy change, bank trust accounts could be transferred to another institution if three-quarters of the beneficiaries asked the bank to resign.
While the proposal wouldn't require banks to bow to the wishes of beneficiaries, Mr. Smith doesn't expect the reform to be adopted anytime soon.
"They'll litigate this to death before they adopt the policy," Mr. Smith said.
He said his objective is "to start a dialogue between the shareholders - many of whom have trusts managed by the banks - and the banks."
In December, the three banks asked the Securities and Exchange Commission to rule that they could omit Heirs' proposal from their proxy statements.
The SEC initially approved the banks' request. But the agency reconsidered after receiving a rebuttal letter from Mr. Smith, a commission spokesman said.
The three banks oppose Heirs' proposal on grounds that removal of a trustee is at odds with Pennsylvania estate law.
PNC's letter to the SEC stated: "The proposal is, under the laws of the Registrant's domicile, not a proper action by security holders." Similarly, Mellon's letter argued that the proposal would give trustees "an authority which the trustor did not give them ... and which is not provided under Pennsylvania law."
Mr. Smith's rebuttal sought to counter those arguments by casting the proposal as voluntary, not a mandate for removal.
"All we're talking about is corporate policy, not Pennsylvania law," Mr. Smith said.
He said he thinks resignation or removal would make the banks better trustees and help them regain footing in the business.
"There's no question they are losing market share," Mr. Smith said. "An open door policy is more conducive to growing their business."
