The Securities and Exchange Commission (SEC) voted 3-2 last week to approve the “proxy access” rule, giving a boost to the shareholder rights movement and loosening the iron grip board chairmen have traditionally maintained over publicly-held corporations.
Under the old rules, shareholders who wanted to nominate their own candidates for the board were required to undertake costly campaigns to win support from institutional and individual shareholders. Under the new rules, the targeted companies must now let long-term shareholders place their nominees in the official proxy materials.
Shareholder activists, including hedge funds, pension funds and labor unions have pushed for the new rule for years, concerned that corporate boards have little incentive to be responsive to shareholder concerns because they rarely face contested elections.
“The financial market meltdown of 2008 revealed a massive failure of oversight by corporate boards,” said IAM Assistant Director of Strategic Resources David White. “This important corporate governance reform improves directors’ accountability to investors and thereby motivating directors for more vigilant oversight of management.”
SEC Chairwoman Mary Schapiro called the rule a victory for shareholders seeking more of a voice over how their companies are run. It will “enhance investor confidence in the integrity of our system of corporate governance,” said Schapiro, who brushed aside opposition to the new rule by a Republican member of the SEC, citing hundreds of comments reviewed by the SEC—among the most it has received for a proposed rule—and the “long and careful consideration” by the agency.