Earlier this month, SEC Chairman Mary Schapiro said the Commission will postpone finalizing a proxy access rule that would allow investors to propose director candidates on the company proxy statement. The SEC is still committed to having a rule in place in 2010, but does not want to rush the process after receiving hundreds of comment letters. Previously, a proxy access rule was expected to be in place in time for the 2010 proxy season.
When the proxy access rule is finalized, large shareholders (most likely owning 1% or greater of large public companies) will be able to submit their nominations for directors to the company, and the company will have to include the nominations on its proxy statement (if certain requirements are met). The measure is supported by several members of Congress, but disagreement exists over how many shares must be owned (and for how long) to get access. Currently, shareholders can nominate their own slate of directors if they are willing to pay for the expensive cost of a proxy fight.
Proponents of proxy access claim it is a tool to stop management entrenchment and to empower shareholders currently hampered by the expense of proposing directors. Opponents argue that states should regulate proxy access (not the Feds) and that shareholders already have tools for fighting management entrenchment (for example, they can sell their shares). Despite opponents concerns, some form of proxy access is inevitable as it is supported by the SEC, Congress, and the Obama administration.