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SEC Plans to Propose Proxy Access in MaySubmitted by: Ted Allen, Publications

Mary Schapiro, chair of the Securities and Exchange Commission, said the SEC will propose several proxy access alternatives in May to allow shareholders to nominate director candidates to appear on management proxy statements.

The details of the alternatives are still under discussion, but the proposals likely will include a ?direct access? rule and a mechanism to allow shareholders to file access bylaw proposals at companies, Schapiro said during a speech today to the Council of Institutional Investors (CII) in Washington. SEC officials are looking at whether to have a sliding scale (based on company size) for the minimum economic stake required to nominate board candidates; that percentage would be smaller at large-cap firms.

?We want to make sure that we have rational requirements?not a means to thwart investor participation,? Schapiro said, prompting applause from the CII audience.

Schapiro said the SEC is committed to addressing proxy access this year, but she acknowledged that the issue ?will be the most controversial issue we address this year after short-selling.?

The SEC has been grappling with the thorny issue of proxy access for decades. The commission proposed a market-wide rule in 2003 that called for a two-step process for shareholders to obtain access, but then abandoned that proposal in 2005 amid opposition from companies and Bush administration officials. In 2007, the SEC proposed a 5 percent ownership requirement (and various disclosure mandates) for shareholders to file bylaw proposals to establish access procedures. Investor advocates complained that the ownership and disclosure standards were too rigorous, while many companies opposed the idea of access altogether. A divided commission ultimately adopted a rule to bar investors from filing access proposals.

Schapiro said the SEC was reviewing the 2003 and 2007 proposals, as well as reviewing what international markets have done. She said the commission specifically was looking at how Scandinavian countries have addressed the issue.

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on April 06, 2009 (boomark / email).