Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, August 30, 2007

Organizations Launch Website to Oppose SEC's Proxy Access Rule Proposals

The Social Investment Forum and Interfaith Center on Corporate Responsibility have jointly sponsored a website, Save Shareholder Rights!, to mount opposition to the SEC's competing versions of amendments to Rule 14a-8(i)(8) that address shareholders' access to management proxy materials for nominating directors.  Among the organizations' concerns: (1) the proposals could curb advisory shareholders resolutions; (2) the 5% threshold for director nominations is too high.  They are soliciting both individual and institutional investors to email their representatives in Congress.

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In the SEC v. Transamerica Corp., 1947, the efforts of the Gilbert brothers resulted in a court decision that “a corporation is run for the benefit of its shareholders and not that of its management.” The original purpose of shareholder resolutions was to police potential “fraud and mismanagement.” It took 50 years to actually win a majority vote. After Enron how could anyone believe management should be able to opt out of the resolution process? Are fraud and mismanagement suddenly existent only in the past? If resolutions did fade from the governance framework, shareowners would then be forced to introduce binding bylaw provisions, which would then probably end up being tailored to each company primarily via litigation in the courts. Nonbinding resolutions allow for flexibility; bylaw resolutions do not.

Posted by: James McRitchie | Aug 30, 2007 12:24:47 PM

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