Despite the SEC’s decision not to appeal the recent decision by the U.S. Court of Appeals for the D.C. Circuit to vacate the proxy access rules, proxy access is still alive and well.
In Tuesday’s release by the SEC, the SEC noted that the amendment to Rule 14a-8, which had been stayed pending the litigation over Rule 14a-11, will go into effect. As discussed in our previous blog, the Business Round Table and the U.S. Chamber of Commerce had challenged Rule 14a-11, which would have permitted shareholders to more easily and more cheaply nominate a minority slate of director candidates for election on an issuer’s board if they held at least 3% of the issuer’s stock for at least three years. The amendment to Rule 14a-8, which was a companion rule adopted by the SEC in conjunction with Rule 14a-11, narrowed the previously broad exclusion available to issuers to preclude shareholder proposals relating to director elections. The new exclusion in Rule 14a-8 is much narrower and will allow shareholders to propose a process for the nomination of directors by shareholders. Starting in 2012, issuers will likely be faced with shareholder proposals to allow for proxy access beginning in 2013. Amended Rule 14a-8 essentially leaves proxy access for particular companies in the hands of activist shareholders and issuers’ Board of Directors.