SEC postpones decision on company proxies

The Securities and Exchange Commission on Thursday delayed a key decision on whether to allow shareholders more access to company proxies, giving chairman Christopher Cox breathing space to address one of the most sensitive issues on his agenda.

The decision is a sign that giving shareholders more say in the nomination and election of boards of directors – a key battleground in corporate governance – has become entangled in US mid-term election politics.

The SEC was to have held a meeting next week to decide whether to let stand a US court ruling that had forced the regulator to reconsider its policy that blocked election-related shareholder proposals.

The court last month ruled that the SEC was wrong to block an attempt by the American Federation of State, County and Municipal Employees (AFSCME) to put a shareholder proposal on the ballot of AIG, the insurer, that would have created a process for nominating company directors on the company proxy card.

The development was hailed as a victory for shareholder activists, which have long been stymied in such efforts by the SEC’s rule 14a-8, which lets companies refuse to allow votes on proposals that “relate to an election”.

Allowing greater shareholder access to the proxy was among the most controversial under Mr Cox’s predecessor, William Donaldson, whose tenure was dogged by divisions among the SEC’s commissioners on the issue.

The Business Roundtable and US Chamber of Commerce oppose any change in the SEC’s stance.

David Chavern, the chamber’s chief of staff, said: “We think that the current system basically works and that opening company proxy materials up to whatever shareholders may want to use them for, means that elections will get hijacked by special interests and it will be special interest politics instead of focusing on what most shareholders care about - which is making money.”

The SEC said 14a-8 would no longer be on the agenda for next weeks’ meeting. The effect is to let stand the court’s ruling until the SEC decides to revisit the issue, which is possible at another meeting on December 13.

The move also makes it hard for politicians to make shareholder access an election issue.

Mr Cox, a former Republican congressman, is thought to have future political ambitions and has gained a reputation for skillfully negotiating other politically sensitive issues like hedge fund and cross-border exchange regulation.

Rich Ferlauto, the AFSCME’s director of pension and benefit policy, said: the SEC had decided “not to act in haste” and instead create an opportunity for shareholders, regulators and issuers to “get together to try to construct a process that might work for everybody”.

The Council of Institutional Investors, a non-profit association of 140 public, union and corporate pension funds, said: “We look forward to working with the SEC to help craft a sensible and effective rule that safeguards the interests of long-term shareholders without being unduly burdensome to business.”


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