Corporate Governance

The Commission and Access: Shout Out to Some of Those Responsible for Access

By J Robert Brown Jr.

We will have a few comments to make on the Access rule just adopted by the Commission.  In reading the 400+ page release, there are plenty of things that will not make access proponents happy.  The 3% threshold when coupled with the three year holding period is excessive.  Nonetheless, the rule is a first step, one that will allow shareholders and companies to gain experience.  There is no doubt that proxy reform in the future will center around reforms to Rule 14a-11.

But first, we need to give credit where credit is due.  If it weren't for the take no prisoners attitude among the opponents to access, we would not be where we are today.  We would be dealing with a far less acceptable provision, one likely compromised by the need to compromise.  So we note a debt a gratitude to:

• The Chamber of Commerce for threatening litigation which essentially resulted in Congress including in Dodd Frank the unequivocal (and essentially unlimited) authority for the Commission with respect to access;
• The majority of the Commission in 2007 that declined to accept the modest proposal to allow an access bylaw, something that would have not been effective but would have taken the wind out of the sails of the pro-access movement. 
• The minority of the current Commission who opposed access at the time of proposal and at the time of adoption.  By making the opposition so clear and so intractable, there was no real reason to try to have the ultimate proposal adopted by the Commission reflect the views and interests of the dissenting commissioners.  Had the opposition been more willing to compromise, access would have contained far more compromises and would have been much weaker. 

These were major contributions to the development of access.  In truth, some form of access was inevitable (see The SEC, Corporate Governance, and Shareholder Access to the Board Room) but the precise contours were far from clear and could easily have resulted in a provision that was far less useful to shareholders. 

Full post as published by The Race to the Bottom on August 26, 2010 (boomark / email).