Securities Law Prof Blog

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

Thursday, November 29, 2007

Reaction to SEC's No-Acess Rule

Reaction to the SEC's 3-1 vote to allow management to exclude shareholder proposals relating to directors' nominations (including bylaw amendments relating to procedures) was swift, heated and predictable.  While business groups praised the decision, the most controversial to date in Chair Cox's tenure, investors groups, union officials and pension funds expressed disappointment with it.  Barney Frank, chair of the House Financial Services Committee, and Christopher Dodd, chair of the Senate Banking Committee, also said they were disappointed with Cox's decision to move forward, which the SEC Chair defended as necessary to provide certainty for the 2008 proxy season.  When the SEC announced two contradictory versions of the rule over the summer, Cox said he supported broader shareholder access to the proxy statement, but after Commissioner Campos's resignation, it became clear that the "no-access rule" would be the only version that could be adopted.  The SEC received 34,000 letters commenting on the proposals.

The American Federation of State, City, and Municipal Employees (the plaintiff in the 2d Circuit case that invalidated the previous version of the rule) has asked JP Morgan Chase and Bear Stearns to allow shareholders to vote for bylaw changes for electing directors and has said that if the companies refuse to include their proposal on the proxy statement it will sue in a challenge to the new rule.  WPost, SEC Votes to Limit Shareholder Rights; NYTimes, S.E.C. Bars Investors’ Directors; WSJ, Cox, in Denying Proxy Access, Puts His SEC Legacy on Line.

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