October 08, 2010
Proxy Access Rules On Hold Until Court Challenge by Chamber of Commerce is Heard
by Robert Kropp
Resolution of lawsuit is expected to be too late for proxy access rules to be implemented for 2011
Responding to a lawsuit filed by the US Chamber of Commerce and the Business Roundtable that
challenges its authority to implement rules on proxy access, the US Securities and Exchange
Commission (SEC) announced this week that it would delay implementation of the rules until it
receives an expedited ruling from the courts, which, it anticipates, will come no earlier than late
Spring of 2011.
The rules on proxy access being challenged by the business
organizations would allow shareowners to submit alternate slates of candidates for corporate boards
of directors. The financial regulatory reform bill passed earlier this year explicitly authorizes
the SEC to adopt such rules.
Under the rules, shareowners who have owned at least three
percent of a company for at least three years will be eligible to have their nominees for boards of
directors included in corporate proxy materials. Shareowners will be permitted to aggregate their
holdings to meet the three percent threshold.
In petitioning for review by the US Court of
Appeals for the District of Columbia, the business organizations argued that the rules adopted by
the SEC are "arbitrary and capricious," and would allow "activist shareholders (to) use the rule as
leverage to further their special interest agendas."