On Aug. 25, the Securities and Exchange Commission voted 3-2, along party lines, to adopt a controversial proxy access regime. The regime permits a single shareholder or group of shareholders owning at least 3 percent of a public company’s shares entitled to vote to nominate a number of directors and have shareholder nominees included in the company’s proxy statement. While legal challenges are expected, the rules are intended to be effective for the 2011 proxy season.
The SEC has been exploring means of facilitating shareholder nominees of directors for decades. In the aftermath of the corporate scandals of the early 2000s, the SEC proposed in October 2003 a right for shareholders to force companies to include shareholder nominees in the company’s proxy statement if certain “triggers” occurred, such as a director candidate receiving a set percentage of withhold votes in an election. That proposal was never adopted.
