On July 27, the U.S. Securities Exchange Commission (SEC) issued a request for comments on a document that includes rules that would severely roll back shareholder rights in the U.S. in two respects: 1. the ability of a shareholder to use the proxy statement to nominate a director ("proxy access"); and 2. threaten the right of shareholders to file resolutions.
1. The SEC proposals would create cumbersome and unworkable procedures for investors to influence the process of company board elections, otherwise known in the U.S. as "proxy access". The SEC proposal denies shareholders the right to submit resolutions urging companies to adopt procedures to include shareholder-nominated director candidates in their proxy solicitations. This represents a roll-back from shareholder rights recently gained under U.S. case law.
2. The SEC is also examining possible changes to the way that non-binding shareholder proposals are dealt with at U.S. companies. Shareholders could be required to hold a significantly larger stake in a company in order to make a shareholder proposal (e.g. a 5% threshold). This would leave shareholders scrambling to put together coalitions in order to continue to engage U.S. companies. Another suggested change would allow companies be able to "opt-out" of the shareholder resolution process entirely, either by a vote of the shareholders or by a simple vote of the board of directors.
For international institutional investors, a key priority will be to send the SEC a strong signal that the right to file non-binding proposals must be preserved as is (issue #2). There is an initiative underway to coordinate international responses to the SEC though the Clearinghouse of the Principles for Responsible Investment (PRI) for PRI signatories. Details and additional resources can be found below and attached.
Given the importance of the proposed changes under consideration, international institutional investors and other advocates of shareholder rights are being encouraged to send the SEC a written submission prior to the October 2 deadline. Your support in this regard would be greatly appreciated.
1. PRI Clearinghouse: coordination of international responses to the SEC on the right to file shareholder resolutions. through the PRI Clearinghouse. PRI Clearinghouse posting by Domini Investments (USA) enclosed (pdf), as is draft PRI signatory letter (doc)
2. Background materials prepared by AFL-CIO. The materials include a template comment letter to the SEC geared towards US investors as well as background materials on both proxy access and shareholder resolutions.
3. Dow Jones Article, "US Activists Launch Online Opposition To SEC Proxy-Access Plans," August 29, 2007 (copied below)
4. SIF and ICCR website: www.saveshareholderrights.org
5. SEC Proposals
* SEC proposals - comments received to date:
* SEC Proposals: Shareholder Proposals Relating to the Election of Directors (34-56161)- http://www.sec.gov/rules/proposed/2007/34-56161.pdf
Shareholder Proposals (34-56160) - http://www.sec.gov/rules/proposed/2007/34-56160.pdf
* SEC Proposals comment submission page: http://www.sec.gov/cgi-bin/ruling-comments?ruling=s71607&rule_path=/comments/s7-16-07&file_num=S7-16-7&action=Show_Form&title=Shareholder%20Proposals
Wednesday, 26 September 2007
SEC lobby on proxy access
A plug for the lobby of the Securities and Exchange Commission in the US. The SEC's proposals on proxy access could actually mark a step backwards if allowed to stand.