M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, November 5, 2009

Schapiro on Shareholder Access

SEC Chair Mary Schapiro's address (yesterday) to the PLI on shareholder voting and proxy access is here.  Her thoughts on shareholder access (in part):

Corporate governance, after all, is about maintaining an appropriate level of accountability — accountability to shareholders by directors whom shareholders elect, and by managers whom directors select. But accountability requires both transparency and an effective means to take action for poor performance or bad decisions.

I believe that the most effective means of promoting accountability in corporations is to make the shareholders' vote both meaningful and freely exercised. One of the most important matters presented for a shareholder vote is the election of the board of directors. However, in most cases today, shareholders have no choice in who to vote for.

They get a ballot in the mail or electronically. And they are presented with a slate of nominees. Most of the time, it's as many nominees as there are positions to fill. And, the nominees are the individuals whom the board itself has chosen.

Looks like the SEC is also taking on the question of empty voting and over-voting as well.  That's quite a full plate.

The review, which is well underway, is being conducted by staff throughout the agency — and involves outreach to market participants to ensure that a broad range of views is considered. As a result, the concept release to be voted on by the Commission is expected to probe a variety of areas:

We'll be asking about ways to ensure accuracy in vote tabulation, given that voting results on many items are becoming increasingly close and many companies have adopted majority voting for directors.

We'll be asking about whether our rules adequately address whether votes are cast by those with an economic interest in the securities. In some cases, for instance, a broker's customers may cast more votes than the broker is actually entitled to vote on their behalf — something called "overvoting". And in other cases, individuals are able to vote shares even though they lack the full economic interest that goes along with share ownership — known as "empty voting."



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