May 21, 2009.
Orchids to SEC Chair Mary
Schapiro for stepping up to one of the most hotly debated and
long-awaited reforms in corporate governance - shareholder voting for
directors.
At issue is whether and
how the SEC should amend the federal proxy rules to allow shareholders
greater access to proxy statements to nominate and elect members of
boards of directors. The issue has become red-hot in recent months
as shareholders have faulted boards of directors for giving out overly
generous executive compensation in a time of slumping stock prices and
corporate profits and for failing to exercise prudent risk management
oversight to protect shareholders from the fallout of the "credit
crunch."
On May 20, the Commission
voted to propose rules that would reform the process and provide greater
rights for shareholders. This is what we expect to see included in the
proposal:
Shareholders who now
may nominate directors at a shareholder meeting will be able to have
their nominees included in the company ballot that is sent to all
voters.
Shareholders will also
have the ability to modify the company's nomination procedures or
disclosure about elections, so long as these proposals do not
conflict with state law or Commission rules.
If adopted, the first
bullet point will represent a major breakthrough. Currently, companies
permit shareholders to nominate different candidates from the ones on
the ballot at the annual shareholder meeting, but that timing is
generally too late to be effective because all the votes have been cast
by then. As a result, shareholders who wish to nominate their own
candidates currently have no viable way to do so other than an expensive
and costly proxy fight in which the shareholders must mail out their own
ballots.