Released: November 29, 2007

SEC limits investors’ proxy power

Source: Greg Farrell, USA Today

Following a contentious hearing Wednesday, the Securities and Exchange Commission adopted a rule that will make it more difficult for shareholders to nominate their own candidates to serve on the boards of companies.

By a 3-1 vote along party lines, the SEC reinforced its long-standing position that public firms can rebuff shareholders’ attempts to get their own director candidates on proxy ballots. A federal appeals court decision last year upended the SEC’s position, creating the possibility that shareholder activists could force their candidates onto proxy slates through litigation.

In a statement explaining Wednesday’s vote, SEC Chairman Christopher Cox promised that he would eventually push for a new rule giving shareholders the proxy-access rights they sought. But because of the legal uncertainty generated by last year’s court decision, Cox said, an affirmation of long-standing SEC policy was the best thing to do.

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