In a much-anticipated decision, the U.S. Court of Appeals for the D.C. Circuit last month vacated in their entirety the so-called “proxy access” rules adopted by the U.S. Securities and Exchange Commission in 2010. Bus. Roundtable and Chamber of Commerce v. Sec. and Exchange Comm’n, No. 10-1305 (D.C. Cir. July 22, 2011).
Proxy access has been a polarizing issue in the corporate governance debate — and a high priority for the SEC — for at least the past three years. Essentially, the controversy is over whether dissident stockholders should be able to require a company to include their board nominees in the company’s own proxy statements. After lengthy deliberation and reviewing hundreds of comments from academics and practitioners, the SEC last year approved by a 3-2 vote regulations designed to make it easier for shareholders to nominate outsiders. The new rules would have allowed investors or groups that continuously held at least 3% of the voting power of a company’s stock for at least three years to nominate their own board candidates and to have them included in the company’s proxy materials, which are mailed to shareholders at the company’s expense.
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