SEC Offers 2 Ways To Give Shareholders More Say

SEC Offers 2 Ways To Give Shareholders More Say - 5/20/2009

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SEC Offers 2 Ways To Give Shareholders More Say
Rachelle Younglai

Reuters. May 20, 2009
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EXCERPT: Shareholders would have greater power to nominate corporate directors, a process now tightly controlled by company management, under a proposal issued by the U.S. Securities and Exchange Commission on Wednesday. With a recession and global credit crisis helping focus attention on the quality of corporate boards, the SEC voted 3-2 to propose two approaches aimed at giving shareholders an easier way to influence the selection of directors -- an issue also known as proxy access. The SEC, which split along party lines with its two Republicans dissenting, received quick praise from institutional investors but a sharp rebuke from business. One approach would let shareholders owning 1 percent to 5 percent of a company's shares, for at least one year, nominate directors. This approach would be linked to the company's size, with shareholders required to hold at least 1 percent in a large company, 3 percent in a midsize company and at least 5 percent in a small company. The other approach would amend a federal rule that sets guidelines for whether a company's management can exclude shareholder proposals from the proxy that is sent to investors before a firm's annual meeting. The SEC would let shareholders propose amending company bylaws so they could nominate directors. This approach would effectively overturn a 2007 SEC decision made under the leadership of former chairman Christopher Cox that allows companies to exclude shareholder proposals for director nominations from corporate ballots. There is a 60-day comment period on the proposal. The five-member agency will most likely decide later this year whether to finalize one or both approaches. SEC Chairman Mary Schapiro and the two Democratic commissioners supported the proposal saying the time had come to give shareholders a real say in determining who will oversee their company.

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