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Members of the financial industry are hoping to expand the debate with regulators over how to give shareholders more leeway to nominate directors to corporate boards, as the U.S. Securities and Exchange Commission moves toward finalizing new rules early next year.
The Altman Group, a proxy solicitation and corporate governance consulting firm, is asking executives and directors of public companies to participate in a short survey on the impact of the SEC's proposed rules, which were issued in July.
The U.S. Chamber of Commerce is using a second comment period--opened by the SEC earlier this month--to flesh out its members' concerns with the proposed rules.
The proxy access proposal has been championed by SEC Chairman Mary Schapiro as a response to the financial crisis in which critics say risk-taking at companies went unchecked.
Proxy access can give shareholders a credible path for ousting boards, which they can then use to push for mergers, asset sales, larger dividends or other measures to boost share prices. Schapiro believes the rule would hold boards accountable to the company's owners.
The SEC's proposed rules would allow shareholders of companies with a global market value of $700 million or more to have their board nominees included in corporate proxy materials if they own at least 1% of the company's shares. The ownership percentages would increase for smaller firms under the rule.
The chamber opposes the idea, noting that it would affect some 15,000 companies, all with unique shareholder-board relations.
"You have a diversity of different structures that spring up and a diversity of management structures," said Tom Quaadman, executive director of the chamber's capital markets center.
The chamber claims the SEC doesn't have the authority to promulgate the rules, but its members' comments will address a variety of concerns and raise new arguments, Quaadman said.
For example, shareholders with easier access to the board ballot box could perpetuate a "short-termism" attitude on corporate boards, Quaadman said. Larger shareholders, perhaps with an agenda, could have front-of-the-line access to elections.
"You start to move the focus of directors away from corporate management and going from annual election to annual election," Quaadman said.
The Altman Group, meanwhile, has teamed up with Nasdaq OMX Group Inc. (NDAQ) to solicit company responses to its own survey about the SEC's proposed rules.
"We were frankly shocked at the low level of response" to the first request for comments, said Altman Group Chief Executive Ken Altman. "We think it's important in this case that all viewpoints should be represented."
The Altman Group also compiled an analysis of some 500 comments the SEC received on its proposed proxy access rules.
Altman said corporations and institutional investors raised similar questions about how the new proxy nomination process would work, which may have prompted the SEC to reopen the comment period.
Congress also is wading into the issue, which is likely to make it easier for the SEC to act. Without substantive changes in the rule or congressional action, the final proxy rules will almost certainly face a lawsuit.
In the House, a broad financial overhaul bill, passed earlier this month, includes language giving the SEC the authority to act in the proxy area.
The Senate version is still being drafted, but Sen. Charles Schumer (D., N.Y.), a key negotiator, is seeking language in the measure giving shareholders access to companies' proxy forms if they want to nominate directors to their board.
The Senate also is pondering broader shareholder issues, although it is unclear whether those provisions will make it into the final measure.
Under a draft financial overhaul bill unveiled in autumn by Senate Banking Committee Chairman Chris Dodd (D, Conn.), shareholders would be given a nonbinding, advisory vote on executive compensation packages, a concept often referred to as "say on pay."
-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; [email protected]