April/May 2010 / Features
Shareholder Rights on the SEC Agenda
This article is about “proxy access,” which means allowing the shareholders to nominate and promote the election of directors to the boards of corporations. SEC rules make it nearly impossible for nominees opposing the management slate to run, but a change has been proposed. The author blames the financial crisis and recent corporate scandals on boards that failed in their oversight role.
The SEC first considered the issue of Proxy Access in 1942. In the 1970’s it considered adopting a mandatory proxy access rule. It held hearings that further explored the issue in 1977. In 2003 the SEC proposed adopting a formal rule that would have made proxy access mandatory for publicly traded corporations in certain circumstances.
In response to intense lobbying, the SEC did not take any action. In addition, two of the three SEC commissioners who voted for the proposal, SEC Chairman William Donaldson and Commissioner Harvey Goldschmid, were replaced.
The current financial crisis has again called into question the performance of corporate directors. According to the author, congress should clarify and make certain the rule-making authority of the SEC.
In December 2009, the House of Representatives passed legislation that would do that, when it voted 232-202 in favor of The Wall Street Reform and Consumer Protection Act (H.R. 4173). The Senate is contemplating similar legislation.
