The SEC’s New Proxy Access Proposal: Thoughtful Reform to Promote Better Corporate Governance or Rushed Response to Political Pressure?
The Securities and Exchange Commission has proposed a proxy access rule that would require public companies to include in their proxy materials stockholder nominees for up to 25% of the board of directors. Nominating stockholders or groups would be required to have held at least 1%, 3% or 5% of a company's shares, depending upon the size of the company, for at least one year. In the same release, the SEC proposed the elimination of the "election exclusion" that permits companies to exclude from their proxy materials stockholder proposals to amend company governing documents regarding director nomination procedures. We expect the debate between those for and against the proxy access proposal to be spirited. We urge careful analysis and deliberation prior to the adoption of changes to the proxy process in order to avoid unintended consequences.