The SEC is starting to sound like it doesn't have much faith that shareholders will hold boards of directors accountable for their failings under the current system.
On Wednesday, the agency opened a proposal to public comment that would allow shareholders who own a certain percentage of a company's stock to place their nominees for the board on the annual proxy ballot that goes out to all the company's shareholders.
This could give small blocs of shareholders more of a say on issues like executive compensation and the levels of risky behavior that companies engage in. Currently, dissident shareholders have to wage a proxy fight at their
own expense if they want to challenge a company's board members or
The AP reports that "[t]he proposal would require different minimum levels of stock ownership
according to the size of the company: 1 percent for the 700 biggest
companies, and 3 or 5 percent for smaller ones. The shareholders would
need to have held the stock for at least a year."
The current global economic meltdown "has led many to question whether boards of directors are truly being
held accountable for the decisions that they make," according to SEC Chairman Mary
Schapiro. "The time has come to resolve this debate."
vote to advance the proposal was split 3-2 along party lines, with
Republican commissioners claiming that the federal government should
not impose its "paternalist" will onto state laws, and should keep
those laws in effect instead of creating a new "federal proxy regime,"
as Commissioner Kathleen Casey labeled it.
The SEC has
previously denied giving dissident shareholders the right to put their
candidates on the annual proxy ballot, and Schapiro admits that
shareholder access is a hot-button issue, so there's no telling whether
or not the SEC will end up adopting the proposal as a formal rule.