Securities Law Prof Blog

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

Wednesday, May 20, 2009

SEC Proposes Rules to Permit Shareholders to Nominate Directors

Once again the SEC is proposing changes to the proxy rules that will allow shareholders access to the management's proxy process to nominate directors. Chairman Schapiro stated in the open meeting:

I believe that the most effective means of providing accountability — in a way that is both cost effective and timely — is to ensure that shareholders have a meaningful opportunity to effectuate the rights that they already have under state law to nominate directors.

Under the proposal before us today, shareholders who otherwise have the right to nominate directors at a shareholder meeting will be able to have their nominees included in the company proxy ballot that is sent to all voters. Given the reality of how the proxy process works, this would turn what would otherwise be a somewhat illusory right to nominate into something that is real — and has a real chance of holding boards of directors accountable to company owners.

As a means of further ensuring that shareholders determine the rules that affect their own rights, shareholders will also be able to use shareholder proposals to affect nomination procedures in any way that does not conflict with the Commission’s rules.

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