by James Hyatt
To the dismay of activist investor groups, Senate negotiators are seeking to limit proposed proxy access provisions in the financial reform bill.
Senate Banking Committee chairman Christopher Dodd of Connecticut proposed this week that investors seeking to nominate directors for shareholder votes — the essence of a proxy access provision already approved separately in the Senate and House — would be required to own at least a 5% interest in the company for two years.
Few, if any, institutional investors would be able to meet such a requirement.
Senate conferees Thursday defeated 8-4 an effort by Sen. Charles Schumer of New York to eliminate the threshold.
Sen. Dodd’s move prompted the Council of Institutional Investors to urge members opposed to the 5% limit to contact White House advisor Valerie Jarrett, a key figure in the negotiations. Various reports said Jarrett, the administration’s liaison to the Business Roundtable, was encouraging the proxy access limitations.
“As a senior advisor to President Obama, Jarrett has significant influence over the ongoing House-Senate conference committee negotiations, particularly regarding the proxy access provision,” the Council said in an “Urgent” email to members. “Tell Valerie Jarrett and the Obama administration to publicly oppose the Senate’s proxy access amendment imposing a 5% ownership requirement.”
The Dow Jones Newswires quoted Kurt Schacht, managing director of the CFA Institute, an association for investment professionals, saying the proposed 5% threshold would “render this important shareholder right useless.”
Bloomberg reported that the chief investment officer of the California Public Employees Retirement System wrote Ms. Jarrett that the 5% limit “is completely unacceptable to responsible long-term investors such as Calpers.”
The Senate proposal would still have to be accepted by House negotiators.
Other shareholder-related provisions previously adopted by the House or Senate also appear to be under attack. RiskMetrics Group’s blog said Senator Dodd had indicated Senate conferees had agreed to drop a provision requiring public companies to have a majority voting threshold in uncontested director elections. “While a large majority of S&P 500 firms have adopted majority voting policies, most mid- and small-cap companies have not done so,” RiskMetrics said.
And it said Senate conferees had declined to accept a provision in the House bill to mandate votes on “golden parachute” pay packages.