The SEC has conceded defeat in the legal battle over one of its most far-reaching steps in years, a plan to make it easier for shareholders to toss out corporate directors.
SEC Chairman Mary L. Schapiro said late Tuesday that the agency will not appeal a recent court decision invalidating the initiative.
The result is a major victory for corporate groups such as the Business Roundtable, which represents chief executives of big corporations, and the U.S. Chamber of Commerce. They sued to block the so-called “proxy access” rule.
The announcement is a defeat for institutional shareholders such as pension funds and labor unions, which argued that greater democracy in the boardroom would make corporate leaders more accountable.
Boards are generally self-perpetuating; they decide whose names appear on the official corporate ballots. The Securities and Exchange Commission was trying to change that by allowing substantial shareholders to put rival candidates on those ballots.
“I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards,” Schapiro said in a statement. “At the same time, I want to be sure that we carefully consider and learn from the Court’s objections as we determine the best path forward.”
“I have asked the staff to continue reviewing the decision as well as the comments that we previously received from interested parties,” she added.
The SEC could try to rewrite the rule and the associated cost-benefit analysis that the federal appeals court in Washington declared deficient. SEC spokeswoman Florence E. Harmon declined to say whether the SEC would take those steps.