The financial reform bill calls for the SEC to write proxy access rules that would give shareholders the ability to use the company’s proxy statement to nominate candidates for the board of directors. Currently, shareholders who wish to solicit votes for nominees must prepare and send their own proxy statement, which is expensive and rarely attempted. Some senators had proposed only allowing proxy access for shareholders holding 5% or greater of a company’s shares, but it appears negotiations have reverted to the original language of the bill, which does not specify a minimum holding requirement. When the SEC last proposed proxy access rules in 2009, the language contained minimum holding requirements of between one and five percent depending on the size of the company.
In the midst of financial reform negotiations in Congress, several questions remain about proxy access, which is not a focus of the bill:
- What should be the minimum holding period to allow shareholders proxy access?
- What should be the minimum ownership requirement?
- Should directors elected via proxy access rules be required to own stock in the company?
- Should long-term investors with small holdings be treated the same as large investors?
The financial reform bill will likely answer the question of whether the SEC has authority to create proxy access rules with a resounding yes, but the specifics of proxy access will likely be at the discretion of the Commission.
