The U.S. Securities and Exchange Commission has ruled that public companies can block investors from putting director candidates on corporate ballots, a major setback for shareholders seeking a greater say in boardroom affairs.

In a 3-1 vote Wednesday split along political lines, the three Republican members, including the chairman, Christopher Cox, supported giving corporations the right to bar director candidates nominated by shareholders from proxy ballots. The lone Democrat, Annette Nazareth, voted against the measure, saying it “stands in the way of shareholders rights to elect directors.”

The vote ended nearly a year of debate between business groups and union and pension funds over the influence investors should have, a debate that generated more than 34,000 letters to the agency.

In its vote, the SEC essentially codified the status quo, which allows companies to ignore shareholder proposals on the election of directors.

In doing so, commissioners turned down a proposal that would have made it cheaper and easier for dissident investors to elect candidates. Corporations, like Bank of America and General Motors, said that additional influence could be disruptive.

Cox has pledged to consider the issue again next year, but despite several last-ditch efforts by pension funds, he decided to move ahead with the vote Wednesday to eliminate the need to go to court to clarify the issue.

“Doing nothing would put all investors at risk,” he said. “Doing nothing at this time would enable an easy run around the commissions required disclosures and our antifraud rules in proxy contests.”

Investor advocates criticized the ruling, calling it the latest policy initiative led by Cox that has failed to benefit shareholders. Many critics say that there is little chance the ruling would be reversed and suggested that Coxs insistence on holding the vote because of lawsuits was a political red herring.

“This is a serious wrong turn from the commission,” said Rob Feckner, president of the California Public Employees Retirement System, one of the largest U.S. pension funds. “In effect, the commission has turned back the clock on corporate democracy by withdrawing a shareholder right that is taken for granted in other developed countries.”

Frederick Rowe Jr., a Dallas money manager who is president of Investors for Director Accountability, was similarly critical. “Now instead of thinking on behalf of owners - Warren Buffett 101 - directors will be more inclined to follow the wishes of the CEO.”

In separate statements, Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, and Christopher Dodd, the Connecticut Democrat who is chairman of the Senate Banking Committee, expressed disappointment with the vote. Both lawmakers said the agency should have waited until a new commissioner had been selected to fill the second Democratic seat on the five-member panel. The post has been vacant since Roel Campos stepped down in September.

Shortly after the vote, the American Federation of State, County and Municipal Employees moved ahead with plans to test the rule. In what is the first wave of about 10 similar proposals, the group asked JPMorgan Chase and Bear Stearns to allow all shareholders to vote on bylaw changes for electing directors.

If the two companies use the SECs new rule to deny the request, the group said it was prepared to go to court to defend a federal appeals ruling that blocked American International Group from barring a similar proxy-access proposal under previous rules.

Until last year, the commission had told companies for more than 30 years that they did not have to allow a vote on changing the rules for the election of directors.

TECHNOLOGY

Google acquires Web security firm

The search giant bought Postini, a provider of security and encryption services, for $625 mil. The all-cash deal is aimed at reassuring businesses that have had qualms about entrusting Google () to oversee their e-mail and other vital applications, such as word processing and spreadsheets, due to security concerns. Google began selling such online software to companies in a bid to build revenue beyond just advertising. Think Equity backed the move and lifted Google’s target price to $700 a share. It rose 0.6% to 542.56.

SanDisk rises on higher pricing

The maker of flash drives surged 4.2% to 51.24 following a positive report and 5.4% increase in spot prices in the flash memory market. Citigroup () has a buy rating on SanDisk, () predicting prices will remain strong through the second half of the year. By contrast, CIBC World Markets earlier this month downgraded SanDisk to market perform contending excess inventory would hurt profit margins.

Intel, () the computer chipmaker, invested $218.5 mil in VMware, () a software maker. Intel will own 2.5% of VMware after it goes public. No IPO data has been set yet. Intel rose 1.1% to 24.96.

Lexmark slashes Q2 EPS outlook

The computer printer maker cut its Q2 earnings outlook to 57-62 cents ex items, below views of 86 cents, citing weak sales of inkjet printers and cartridges. Lexmark Int’l () is restructuring to reduce reliance on inkjet printer sales and invest in printers with more competitive features, such as wireless connections. It sees its Q3 EPS at break-even to 10 cents vs. views of 81 cents. Shares tumbled 6.4% to 46.25.

Imation cuts operating income

The maker of recording discs and tapes said it sees $405 mil-$410 mil in ‘07 operating income, lower than $412.7 mil views. Its demand was softer due to aggressive pricing on flash drives and magnetic tape for storage. Imation () will specify its full- year expectations July 19. Analysts guide for $2.01 a share on $1.75 bil in revenue. Shares slid 4.8% to 35.43.

Orbotech, () an Israeli maker of testing equipment used to manufacture printed circuit boards and flat-panel displays, said it expects $35 mil less revenue from flat-panel display inspection equipment revenue for 2007. It fell 6.4% to 21.98.

TRANSPORTATION

Boeing climbs after 787 debut

The aerospace company rose 1% to 99.90 after unveiling its first fully assembled 787 Dreamliner. Boeing () has secured 677 orders for the new passenger jet, selling out delivery positions through 2015, two years after rival Airbus expects to roll out its competing A350. Over the weekend, Boeing announced that Air Berlin ordered 25 787s worth $4 bil at list prices. The order is the largest single order placed by any European carrier, Boeing said.

GE dispute may stall Airbus order

A dispute between the plane maker and turbine giant GE () could result in Airbus’ A350 extra wide jets being delayed, according to a published report. The dispute stems from GE supplying Airbus’ rival Boeing’s () 787 Dreamliner with its engine. GE said they will not build a new engine that competes with Boeing’s 777 model. GE rose 0.4% to 38.62.

Southwest leads new fare hike

The discount air carrier raised most of its fares by $1-$10 each way over the weekend, and many competitors quickly matched the increases. It’s the second time Southwest Airlines () has raised fares this year, compared to six such hikes last year. JPMorgan said the new fares would improve Southwest’s revenue per passenger miles. In late June, United Airlines () raised its prices twice in two weeks, and American () and Delta () quickly followed with similar hikes. Southwest was unchanged.

Airlines adjust to offset higher fuel

Higher fuel prices increased costs for U.S. airlines by 10.6% in Q1, according to an Air Transport Association study. American Airlines, () Continental, United and others were able to compensate by increasing fuel efficiency 16.7%. The industry’s operating costs per available seat mile fell 3.8% on efficiency improvements. Labor edged out fuel as the industry’s No. 1 cost. American was flat, Continental fell 1.2% and United dipped 0.2%.

Ford Motor () and Southern California Edison agreed to team up and test the automaker’s prototype rechargeable hybrid vehicles. Tests with the California utility company could help hasten mass production of Ford’s technology. Ford aims to have a plug-in hybrid by the end of the year and 20 models by ‘09. Ford dipped 0.3% to 9.08.

METALS

Schnitzer Steel beats, profit up

The manufacturer of recycle metal soared 17.3% to 61.36 after it said its Q3 profit leapt 50% to $1.47, topping views by 40 cents. Revenue rose 40% to $709.4 mil, above views. Schnitzer Steel Industries’ () ‘ metals recycling revenue jumped 53% to $587 mil, while steel manufacturing revenue rose 8.1% to $112.5 mil. Also auto parts revenue was up 23%.

ELECTRONICS

FLIR Systems slips on downgrade

The maker of visual systems designed to see through fog, smoke or dark settings was downgraded by Raymond James to market perform from outperform largely on valuation. The research firm, however, maintained its $1.65 EPS estimate for ‘07, which is 3 cents higher than consensus estimates. FLIR Systems () fell 1.9% to 46.44.

CONSUMER

Sony cuts price on game console

The Japanese electronics maker trimmed the price of its struggling PlayStation 3 by $100, or 16.7%, in a bid to boost disappointing sales. Despite the release of the new console in Nov., Nintendo’s Wii and Microsoft’s () Xbox 360 have been gaining market share. Sony reduced the price on its 60 gigabyte PS3 from $599 to $499, double the cost of the Wii. Sony () will launch a new high-end PS3 with a bigger hard drive in Aug. It fell 0.2% to 53.04.

Topps board rejects takeover bid

The board of directors of the maker of baseball cards’ unanimously recommended shareholders to reject rival Upper Deck’s tender offer valued at $425 mil in cash, or $10.75 per share. Topps () said Upper Deck’s tender offer is “substantially similar” to bids submitted by the company in April and May. Topps said it plans to continue discussions with Upper Deck to see if it can come up with a higher deal than Tornante-Madison Dearborn, which offered $9.75 per share in cash. Topps fell 1% to 10.49.

RETAIL

Limited Brands sells majority stake

The owner of Victoria’s Secret and Bath & Body Works said it agreed to transfer a 75% stake in its Limited Stores chain to affiliates of buyout firm Sun Capital Partners and that it finalized the sale of a 75% stake of its Golden Gate Capital. Sun Capital will contribute $50 mil into the business and will arrange for a $75 mil credit facility. Limited Brands () is shedding its underperforming units. Limited fell 2.6% to 28.24.

Children’s Place expects Q2 loss

The children’s apparel chain said it expects a Q2 loss of 94-98 cents a share below views of a 59-cent loss. Same-store sales fell 4% in June and are flat for Q2. But Children’s Place Retail Stores () expects better results for the second half of the year. Also the company had delayed filing due to an investigation into its stock-option granting practices, and said it expects to become current by the end of Aug. It tumbled nearly 12% to 46.42.

99 Cents Only Stores, () a discount-store operator, said Q1 same-store sales rose 11.1% to $293 mil, above views. Sales grew 11.4% to $283 mil. It rose 6% to 14.22.

BEVERAGES

Coke wins deal to sell at tracks

The world’s largest soda company said it will become the exclusive soft drink provider 10 NASCAR racetracks that currently are served by Pepsi, () whose contract expires in 2012. The multimillion-dollar deal also will grant Coca-Cola () exclusive rights at NASCAR’s top track, the Daytona Int’l Speedway, ending its nearly 50-year tie to Pepsi. Coke edged up, Pepsi slightly slipped.

LEISURE

Prop woes hurt Royal Caribbean

The cruise ship company said Q3 profit will be hurt by 14 cents because of the cancellation of two Celebrity Cruises sailings due to propeller damage. Views are $2.06. Royal Caribbean Cruises () said a vessel hit a submerged rock on July 12 in Villefranche, France, after an electrical malfunction. A trip set to depart on July 12 was canceled. The repairs will cut short a 12-day Millennium cruise that began on June 30. Shares slipped 0.4% to 42.51.

What does it take to be part of the middle class? Does it take owning a home? A college education? A job that comes with a white collar (or in the Bay Area, a T-shirt and a pass to the Google cafeteria) instead of a blue collar?

It’s not a new question, but one that is taking on increasing urgency. Three policy debates, two at the federal level and one in California, center on how much families need to earn to make ends meet - and how these debates play out will affect millions of Americans over the coming years:

– Nationally, the Democratic majorities in Congress and the president have reached a stalemate over reauthorization of the State Children’s Health Insurance Program. President Bush proposes to limit the program to children in families with incomes of no more than twice the federal poverty level ($34,340 for a family of three), a move that would prevent California from using federal funds to subsidize health coverage for 200,000 children. Bush argues that families with incomes above this level can afford to purchase coverage without public support. The congressional majority has pushed for a higher eligibility limit, more in line with that of California’s Healthy Families’ Program.

– The question of who would qualify for assistance under a recent federal effort to mitigate the mortgage crisis hinges on how much families can afford to pay for shelter.

– In California, one of the major sticking points in efforts to reform the state health care system and extending coverage to the uninsured is affordability - how much individuals should be asked (and in some instances, required) to pay for health coverage and out-of-pocket costs and who should be eligible for how much of a subsidy.

In all of these policy debates, this much seems beyond dispute: To be middle class requires an income that is at least large enough to make ends meet without help from public programs. You need to earn enough to pay for the basics - a safe place to live; transportation to and from to work; child care when parents are at work; food; health care; and taxes.

Yet defining middle class can be elusive. Clearly, families need to earn more to stand on their own in San Francisco than in Arkansas.

So, in order to inform the current policy debates, the California Budget Project - a nonprofit research group based in Sacramento - calculated the income needed for families to buy the basic necessities. We found that in California, and in the Bay Area in particular, the cost of a basic family budget often exceeds the earnings of two full-time workers earning the state’s median wage ($17.42 in 2006).

The problem often extends to even those families above the median state income. That will be no surprise to millions of California households who struggle to pay for basic needs. But it may be an eye-opener to policymakers who have relied on the poverty level to determine whether families are in need of public support.

In its calculations of the basic family budget, the California Budget Project used the actual cost of basic necessities in 10 California regions and the state as a whole for four types of families: single adult; single parent with two children; two-parent family with one working parent and two children; and two-parent family with two children and both parents working.

(The detailed methodology is available at «www.cbp.org».)

We assume that families rent, rather than own, because high home prices place ownership out of reach for so many Californians. We use federal fair market rents, which are based on somewhat lower-than-average costs paid by recent movers. We assume that a single adult would rent a studio, and that the families with children would rent a two-bedroom apartment.

We found that a Bay Area family with both parents working would pay, on average, $1,312 a month for housing and utilities. That’s roughly the monthly pay of a full-time minimum wage worker.

For single-parent or two-worker families with children, the next necessity is child care. These costs depend, of course, on how old the children are, what kind of care parents choose, and whether family members or friends are willing to provide care for free. We assumed that parents place one child in full-time care and another in after-school care, a generally less costly choice than a licensed child care center, at a monthly cost of $1,216 in the Bay Area.

Transportation runs nip and tuck with food as a family budget item, depending on which region of the state we look at and which kind of family. With the exception of workers living in San Francisco, the vast majority of Californians drive to work alone, but the length and cost of their commutes vary widely. Using the average commute distance and assuming a modest amount of weekend driving, we calculated that a two-worker family in the Bay Area spends $721 a month to get around.

Our basic family budget for food is divided between meals at home and meals away from home. For food at home we assume a basic but nutritious diet, but no Brie and Chardonnay. For meals away from home, we assume that a two-worker family spends $28.30 a week, enough to buy school lunches, a few lunches in the work cafeteria, and an occasional pizza. Altogether, the budget for food for a two-worker Bay Area family is $731 a month.

Next comes health care. Just over half of nonelderly Californians are covered by job-based health coverage. Workers contribute an average of $235 a month toward their coverage, and pay substantial amounts out of pocket for co-payments, deductibles and uncovered costs like dental or vision care. But 6.8 million Californians, many of them in working families trying to reach the threshold of the middle class, are uninsured. As part of the basic budget, we added the cost of individually purchased health insurance. For a two-worker family in the Bay Area, the cost of insurance and out-of-pocket medical expenses added $943 a month to the budget.

To these basic budget items for a two-worker family we then added miscellaneous expenses of $506 a month: for telephone service, clothing, housekeeping supplies, reading and educational materials such as a newspaper, but no entertainment or big-ticket items like computers or furniture. Finally, we factor in taxes. For a two-worker family in the Bay Area, that comes to $994 a month, much of it in payroll taxes for Social Security, Medicare and state disability insurance.

Before calculating the bottom line, it’s important to remember what’s not included. This budget doesn’t pay for vacations or family trips to the movies. It doesn’t cover saving for college costs, retirement or the down payment on a home. It would fly apart if one worker were laid off, or had an accident or serious illness.

So here’s where our calculation ends up: A single adult in the Bay Area without job-based health insurance needs to earn $29,633 a year to cover the basic budget. A two-worker family must earn $77,076 a year.

Put another way, in the Bay Area it now takes two parents, each working full time for slightly more than state’s median hourly wage, just to reach the threshold of a middle-class life. In families with just one earner, he or she must earn far above the median wage to cover the same budget.

Households near these middle-class thresholds don’t live in desperate poverty, and millions of lower-income families are far worse off. Many do, however, face daily insecurity, living paycheck to paycheck. Consumer debt statistics indicate that others make ends meet on borrowed money.

Our research tells us that public policies - whether the issue is federal support for health coverage for children, state efforts to cover the uninsured, or responding to the meltdown in the mortgage market - should be informed by a realistic assessment of the cost of making ends meet, and the economic circumstances faced by California’s families.

Jean Ross is the executive director of the California Budget Project, a nonprofit research group in Sacramento ( «www.cbp.org»). Contact us at insight@sfchronicle.com.