Securities Law Prof Blog

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

Wednesday, August 25, 2010

SEC Releases Final Rules on Proxy Access

The SEC released today the much-anticipated final rules on proxy access and directors' nominations.  I set forth below the release's introduction; I will analyze the new rules in a subsequent post.

We are adopting changes to the federal proxy rules to facilitate the effective exercise of shareholders’ traditional state law rights to nominate and elect directors to company boards of directors. The new rules will require, under certain circumstances, a company’s proxy materials to provide shareholders with information about, and the ability to vote for, a shareholder’s, or group of shareholders’, nominees for director. We believe that these rules will benefit shareholders by improving corporate suffrage, the disclosure provided in connection with corporate proxy solicitations, and communication between shareholders in the proxy process. The new rules apply only where, among other things, relevant state or foreign law does not prohibit shareholders from nominating directors. The new rules will require that specified disclosures be made concerning nominating shareholders or groups and their nominees. In addition, the new rules provide that companies must include in their proxy materials, under certain circumstances, shareholder proposals that seek to establish a procedure in the company’s governing documents for the inclusion of one or more shareholder director nominees in the company’s proxy materials. We also are adopting related changes to certain of our other rules and regulations, including the existing solicitation exemptions from our proxy rules and the beneficial ownership reporting requirements.

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What the SEC has done is establish “private ordering” with a very high floor. Within a few years, we can expect to see 100s of proposals calling for more reasonable thresholds and holding periods, as well as allowing a greater proportion of shareowner nominees. Corporate governance activists have been given a new focus. Just as we have been struggling to obtain majority vote standards, we will now be fighting for more reasonable nomination requirements. To the John Cheveddens and Ken Steiners of the world I say, “Time to gear up; may a thousand access proposals bloom.” Start with small companies where the SEC has delayed implementation of Rule 14a-11 and where, on average, corporate governance reforms are furthest behind. Have an access proposal ready for next year? Please share it.

Posted by: James McRitchie | Aug 25, 2010 4:32:24 PM

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