SEC Chairman Mary Schapiro is tackling, among a bucket list of other issues, the rights of shareholders to nominate members of company boards. On Wednesday, Schapiro called on corporate America to upgrade its proxy voting practices to give shareholders a louder voice in governing the companies they own,
Reuters reports.
The SEC in May
proposed a new rule
(14a-11), which would allow shareholders to include a nominee for
a director's seat in company proxy materials under certain circumstances, addressing investors demands to have more access. Currently, shareholders are able to nominate directors, but they can only do
so through a proxy battle, which is about as easy as it sounds.
However, the new rule, which is still under review, dictates the voting shareholders need to own as little as 1% of the company and for a mere year. This has
incited a chorus of opposition, mainly from small business owners worried that the price of goods will rise as suppliers are forced to spend money complying with the new rules, and from current and former CEOs, who have aired several concerns.
One of the main problems raised is that the rule, as drafted, would open up the voting process to potentially destructive speculation, given the low bar for voters, and undue politicization. (Imagine a world in which would-be chairs take the time out of other duties to campaign for a seat!)
A good idea would be to, at a minimum, raise the threshold to at least 5% to 10% ownership, depending on if its an individual or a group of investors, and to lengthen the ownership period to two years, plus the requirement to hold the share for a certain amount of time after the election. -
Sara Behunek
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