SEC plan for shareholders draws criticism

July 28, 2011

House Republicans are accusing the Securities and Exchange Commission of wasting time and money on a plan to make it easier for shareholders to oust members of corporate boards.

The criticism comes days after a federal appeals court shot down the SEC plan. The court said the agency failed to do its homework before changing the rules of corporate elections last year to let shareholders put candidates on the official company ballots.

Three senior members of the House Financial Services Committee called on the SEC to provide an accounting of the time and money it spent on the initiative.

The SEC’s investment in the undertaking “demonstrates a serious mismanagement of the agency’s priorities,” wrote Reps. Scott Garrett (R-N.J.), Jeb Hensarling (R-Tex.) and Randy Neugebauer (R-Tex.).

In a letter to SEC Chairman Mary L. Schapiro, the lawmakers noted that the court accused the SEC of failing to evaluate the costs that companies could incur when the rule is used by “shareholders representing special interests, particularly union and government pension funds.”

The SEC has not said whether it will appeal, go back to the drawing board, or drop the effort.

“But we note that the rule sought to make it easier for shareholders to nominate candidates to boards and to hold boards accountable,” SEC spokesman John Nester said.

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