Comprehensive Proxy Reform

The Commission today voted to submit a comprehensive concept release examining all aspects of the proxy process.  As the release describes:   

• Accordingly, in this release, we are reviewing and seeking public comment as to whether the U.S. proxy system as a whole operates with the accuracy, reliability, transparency, accountability, and integrity that shareholders and issuers should rightfully expect. With over 600 billion shares voted every year at more than 13,000 shareholder meetings, shareholders should be served by a well-functioning proxy system that promotes efficient and accurate voting. Moreover, recent developments, such as the revisions to Rule 452 of the New York Stock Exchange (“NYSE”) limiting the ability of brokers to vote uninstructed shares in uncontested director elections and other corporate election of directorshave highlighted the importance of accuracy and accountability in governance trends such as increased adoption of a majority voting standard for the the voting process.

As we will discuss in subsequent posts, the outcome will also be affected by the Dodd-Frank Wall Street Reform Act.  The Act gives the SEC rulemaking authority over the definition of independent directors (at least on compensation committees), authority to control voting rights of brokers over uninstructed shares, and the authority to control the precise matter to be put to a vote under the say on pay requirement.