by James Hyatt
After days of intense political drama, House and Senate negotiators on the financial reform bill agreed to toss a key shareholder governance issue — proxy access — back to the Securities and Exchange Commission.
Investor activists had reacted with alarm to efforts by Sen. Christopher Dodd (D-Conn) to require shareholders to own at least 5% of a company’s shares for at least two years in order to gain access to corporate proxy procedures.
And Sen. Charles Schumer had floated a 3%-three-year ownership proposal. House negotiators, meanwhile, stoutly resisted the Senate limits.
In the end, negotiators reverted to Senate language giving the SEC authority to write proxy access rules, but without imposing particular ownership requirements.
They also gave the SEC authority to exempt small public companies from the proxy access rule.
Some limits to proxy access — or the ability of shareholders to nominate candidates for corporate boards through the corporate proxy system — still may emerge. The SEC last year proposed permitting shareholders to nominate directors if they owned at least 1% of the voting securities of a large company, at least 3% of the voting securities of a mid-sized ($75 million to $700 million in market value), or at least 5% of a smaller company. Shareholders could aggregate holdings to meet those levels. The proposal also would require ownership for at least a year.
The proposal is still pending, and a mountain of public comments have been received. In view of the recent financial reform debate, it seems likely that the SEC may propose revisions and seek further comment.
RiskMetrics reported that the conferees had agreed to allow companies to propose advisory votes on companies every two or three years, instead of every year, something of a setback for “say on pay” advocates.