| are tough. We all know that…even | | | | to ensure fair play? |
| corporate boards and the federal government are | | | | No Blanket Regulations |
| feeling the not-so-subtle pinch. This economic crisis | | | | Some who are against the SEC’s |
| is of epic proportions, and the catastrophic fall of | | | | proposed changes argue that allowing shareholders |
| several high-profile corporations has many | | | | more proxy access would not benefit the election |
| wondering not only how this all happened, but who | | | | process and could potentially cost companies |
| is to blame for it? | | | | more in time and material expenses. |
| Accusations of short-term planning, poor | | | | Some opponents feel strongly that a company |
| judgment, and individual greed have brought | | | | should be permitted the right to elect members |
| corporate accountability into the spotlight. In | | | | to their boards whom they feel will do the best |
| particular, concerns have been raised as to | | | | job in the interest of the company. They fear |
| whether corporate boards of directors are | | | | that special interest groups could hijack companies |
| properly focused on shareholder interests, | | | | and/or that shareholders would not be able to |
| exercising proper oversight of management, and | | | | choose the best candidates for nomination. Others |
| whether they are appropriately held accountable | | | | believe that shareholders are not that interested |
| for their decisions. | | | | in the nomination process and are more inclined to |
| Recently, the Securities and Exchange | | | | trust their incumbent board members. |
| Commission voted to propose changes to | | | | Others argue that one or two bad boards do not |
| shareholder proxy access in efforts to make it | | | | justify these kinds of blanket regulations and/or |
| more easily accessible for shareholders to | | | | the federal government’s imposition on |
| nominate candidates, and have their nominees | | | | the state regulation of their corporate governance |
| included in company-issued ballot materials. | | | | is not necessary. They raise the point that this |
| Reasoning behind the Proposal | | | | type of federal regulation should only be applied |
| Typically, incumbent board members choose | | | | on a case-by-case basis. |
| whom to nominate and include it in a | | | | Voting Rights |
| company’s proxy materials that are sent | | | | Those for the proposed changes argue that the |
| to shareholders. If a shareholder wishes to | | | | proxy access amendments would bring a sense |
| nominate a candidate of his or her choosing, they | | | | of healthy competition to the nomination process. |
| have to wage a proxy fight and send out their | | | | It would allow shareholders to select nominees |
| own ballot materials to other | | | | with the most relevant backgrounds to represent |
| shareholders…a costly course of action. | | | | them. It would also ask board incumbents to |
| The proposal is designed to give shareholders a | | | | prove to shareholders (and others invested in |
| genuine and affordable ability to exercise their | | | | their corporation) why their nominees are the |
| rights to nominate board members for the | | | | best candidates for the job. |
| companies whose stock they own. | | | | They argue that shareholders would become |
| The Proposed Rules | | | | more involved in the voting process and feel |
| While allowing real access to proxy materials for | | | | more empowered to hold board members |
| shareholder-nominated candidates may seem to | | | | accountable for their actions, thus ensuring fair |
| some like a great way for rogue shareholders to | | | | competitive practices and fair elections. |
| upset a director’s board, the SEC has | | | | The Conclusion |
| proposed the following rules to keep the potential | | | | While the SEC’s proposed changes to |
| practice in check. | | | | proxy access may seem daunting to some, the |
| • Shareholders must own a certain | | | | fact remains that shareholders have always had |
| percentage of a company’s voting | | | | the right to nominate candidates for the board |
| securities (varies by a company’s | | | | elections. Therefore, making it easier and more |
| worldwide market values). They can combine | | | | economical for them to do so does not scream |
| holdings to meet these thresholds. | | | | of injustice. |
| • A one-year holding period would be | | | | After all, even if shareholders were more easily |
| required of any shareholder wanting proxy access. | | | | able to put their chosen nominees on the ballot |
| • Shareholders must sign statements of | | | | within a company’s proxy materials, it |
| their intent to hold onto their securities until the | | | | would in no way ensure that their nominee(s) |
| annual meeting. | | | | would be elected to the board. |
| • Shareholders must certify that they do | | | | In this time of economic crisis and looming |
| not wish to gain more than a minority | | | | questions of corporate accountability and an |
| representation on the board, and that they are | | | | astounding lack of answers, it seems important |
| not holding their stock in an attempt to change | | | | for companies to disclose and allow as much |
| the control of the company. | | | | transparency as possible with their shareholders. |
| While it may sound very democratic to bring a | | | | After all, they have a vested interest in the |
| strong shareholder voice to corporate ballot, do | | | | companies, and the boards are in place to protect |
| we really need to bring the fundamentals of | | | | their interests. |
| political democracy to corporate voting sessions | | | | |