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Activist shareholders may soon get even busier. In July the Securities and Exchange Commission’s corporate finance division endorsed the idea of letting investors nominate candidates to the board of directors using a company’s proxy card. SEC chairman William Donaldson asked the division to prepare proposed rules on the matter. If the new regulations are approved by the agency, they could take effect by April or May 2004, Donaldson said in a press conference. Currently, investors who want to nominate candidates for the board must file their own proxy documents with the SEC, a costly and time-consuming process. But if they get access to the proxy card, they will likely find that it comes with a few conditions. The finance division’s report recommends that a shareholder be required to hold a stake in the company for as long as three years before being able to nominate directors. Also, the SEC needs to decide whether a shareholder must own a “significant” stake � or just a few shares � in order to put up names for the board, the division said. And the agency must determine how many directors a shareholder could nominate to the board. The SEC’s proposed rule changes would be a huge victory for hedge fund managers and institutional investors. But corporate executives counter that giving dissident stakeholders the right to nominate directors on the proxy card would create boardroom bureaucracy.

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