The commissioners of the SEC have decided by a vote of 3-1 to restate the Commission’s view that companies can exclude proposals to allow shareholder director nominees on the company’s proxy statement.
As previously discussed here under the heading, SEC shareholder Access Proposals, the SEC was considering two conflicting proposals on the matter. Proposal 1 was to strengthen the language of the relevant rule (Rule 14a-8(i)(8)) because of a Second Circuit decision that said the language did not mean what the SEC said it meant. Proposal 2 was to scrap the former rules and allow for shareholder director nominees to appear on the company’s proxy statement.
By way of background, shareholders have a state law right to nominate and elect directors; they just can’t use the company’s proxy statement to solicit votes for their candidates. The SEC believes the philosophy of the proxy statement is in conflict if two competing parties (the company and a rogue shareholder) can use the same document (the company’s proxy statement) to solicit proxies for competing nominees for director.
The SEC, after receiving 34,000 comment letters, has decided to proceed toward Proposal 1. Several investor groups have disapproved, including the influential RiskMetrics (ISS).
