Elisse Walter (who, by the way, was the Associate General Counsel of Counseling at the SEC when I was in the General Counsel's Office) has given a talk on the SEC and corporate governance, specifically access. Commissioner Walter not only indicated support for access but more or less suggested that the access proposal put out by the Commission (and not adopted) in 2007 was flawed, at least in part because of the high percentage threshold necessary to submit an access proposal. As she noted:
- To me, the fundamental question is: "Should shareholders have a real say in determining who will oversee management of the companies that they own?" I believe strongly that the answer is yes. In my view, the Commission failed to address the question effectively in 2007, when it voted to propose two alternative approaches related to shareholder director nominations. As you know, the first approach, which the Commission never adopted, would have amended Rule 14a-8 to enable shareholders to include shareholder nomination by-law proposals in the company proxy materials under certain conditions. The second approach, which the Commission eventually adopted, amended Rule 14a-8(i)(8) to allow companies to exclude from their proxy materials shareholder proposals that relate to a nomination or an election for board members or a procedure for such nomination or election. I can understand why former Commissioner Annette Nazareth called the second approach the "non-access" proposal. But, quite frankly, I think that both alternatives fail to provide sufficient shareholder access.
As for changes that she might want to examine whenever a new access proposal emerges, she had this to say:
- First, I am very troubled by the 5% ownership threshold. I would be inclined to scale that number back substantially. Second, a tiered approach to ownership to address smaller publicly held companies has some appeal to me, but I need to evaluate further the pros and cons of this approach. Third, I think that the disclosure requirements appear far too stringent and exceed those required in proxy contests. I question whether these requirements are appropriate in this context.
These are thoughtful comments that deserve consideration. But the other thing the Commission should consider is an access proposal that does not center around a bylaw but requires the company to include nominees submitted by eligible shareholders directly into the proxy statement. Shareholders already have the right to nominate directors. Large shareholders (or groups of shareholders) should have the right to include these nominees in the company's proxy statement (and paid for with the company's resources) without having to first adopt a bylaw to that effect.