SEC will discuss 'proxy access' rules for shareholders to nominate directors
The Securities and Exchange Commission said Wednesday that it will meet next week to consider rules that may make it easier for shareholders to oust corporate directors, after investor groups said that boards picked by management failed to rein in executive pay and risky lending before the financial crisis.
Commissioners will vote next Wednesday on whether to let investors nominate board members on company ballots mailed to shareholders before director elections, the SEC said in a statement.
The SEC has considered permitting so-called proxy access since 2003, only to back away in the face of opposition from companies. Public pension funds, including the California Public Employees' Retirement System (Calpers), say the change is needed to make directors more accountable to investors rather than rubber stamps for management.
The current process of nominating directors requires that shareholders mail a separate ballot with the names of dissident candidates and persuade other investors to vote along with them. Shareholder groups have argued that the process is time-consuming and prohibitively expensive.
Calpers and 11 other pension funds urged the SEC in a letter Monday to set an ownership threshold of no higher than 3 percent and a holding period of no more than two years. A longer holding period would "disenfranchise shareholders from the very purpose of the rule," the funds wrote.
Business groups, including the U.S. Chamber of Commerce, say labor unions and hedge funds would use proxy access to push agendas that are detrimental to other shareholders. The Business Roundtable, which represents chief executives of the biggest U.S. companies, has said unions and pension funds will use the threat of a fight for board seats to negotiate for other concessions.