Tuesday, June 23, 2009
SEC Commissioner Troy A. Paredes spoke at the Conference on "Shareholder Rights, the 2009 Proxy Season, and the Impact of Shareholder Activism" sponsored by the Center for Capital Markets Competitiveness, U.S. Chamber of Commerce, in Washington, D.C. on June 23, 2009. As you will recall, Commissioner Paredes voted against the SEC's proposal Shareholder Access reforms last month. Here is an excerpt of his remarks:
The proposal, especially proposed Rule 14a-11 dictating a direct right of access to the company's proxy materials, encroaches far too much on internal corporate affairs, the traditional domain of state corporate law, and in doing so, denies each corporation the flexibility needed to adapt its governance practices to its distinct qualities and circumstances.
The whole of the Commission's access proposal is about far more than the driving goal of the '34 Act to empower investors by putting information in their hands. The proposal reaches too far past the point of being about disclosure or even about the voting process. Rather, the essence of the proposal is to realign corporate control at the federal level, upsetting the longstanding federalism balance in the area of corporate governance. The mandatory quality of Rule 14a-11 — particularly when one recognizes that the proposal allows a firm to adopt a more generous access regime but not one with more restrictions — belies that the rule is about disclosure or process as compared to achieving a particular substantive outcome.