Proxy Access: Looking Back at 2015 and Ahead at 2016

During the 2015 proxy season, one of the most prominent governance topics was the submission of proxy access proposals by shareholders. New York City Comptroller Scott Stringer submitted shareholder proposals for proxy access on behalf of New York City pension funds to 75 companies for voting during the 2015 proxy season. In the fall of 2015, Stringer targeted 72 companies with proxy access proposals for voting during the upcoming 2016 proxy season—consisting of 36 new companies and 36 companies that received proposals last year, but had not yet enacted acceptable proxy access bylaws. In connection with his 2016 campaign, Stringer highlighted the fact that since November 2014, the number of companies with bylaws that contain a proxy access policy has increased from six companies to 115 companies. In light of this apparent success and Stringer’s campaign, we expect that proxy access proposals will continue to be a hot topic into the future.

Basics of Proxy Access Bylaws and Trends from 2015

Any shareholder of a company is ­permitted to nominate individuals to serve as directors for election at the company’s annual meeting. However, without proxy access, a nominating shareholder must not only follow the requirements set forth in the company’s charter and bylaws, but such shareholder must also undertake the additional expense and effort of preparing its own proxy statement and proxy card for the nominated director, as well as conducting its own proxy solicitation for the nominated director. A proxy access bylaw provides shareholders with the opportunity to take advantage of using the company’s proxy statement for purposes of a director nomination and thereby saving the expense and effort of conducting their own solicitations. As readers may recall, in August 2010, pursuant to its authority under the Dodd-Frank Act, the U.S. Securities and Exchange Commission (SEC) issued its final rule (Rule 14a-11) regarding shareholder proxy access, which was to be effective in November 2010 but was struck down in July 2011 by the U.S. Court of Appeals for the D.C. Circuit on the grounds that the SEC was arbitrary and capricious in promulgating the rule. Since that time, companies have begun to enact proxy access policies on their own, and shareholders have been submitting proposals to force their companies’ hands.