SEC Commissioner’s Resignation Could Stall Changes to Proxy Access

The five member panel of commissioners of the Securities and Exchange Commission continued to shrink this week, as another commissioner has decided to move on--the second departure in less than a month.

Nine-year SEC veteran Annette L. Nazareth, a Democrat, officially announced her resignation Tuesday, trailing only a few weeks behind Roel Campos, the only other Democratic commissioner at the SEC, who left his seat September 18, after five years as a commissioner.  Left to serve on the board are Chairman Christopher Cox, Kathleen L. Casey, and Paul S. Atkins.

Nazareth has yet to set a date for her leave, but has notified President Bush, who nominates commissioners before they are approved by Congress, that she does not wish to be re-nominated for the role. And while her term technically ended on June 5, Nazareth, like all commissioners, bears the right to stay in her seat for a further 18 months after a term’s end, unless a successor is appointed sooner.

“Such shots across the Cox Commission's bow could become commonplace in coming months. In some ways, these personnel moves underline what has been apparent in D.C. for some time--the Cox Commission's lame duck status,” Patrick McGurn, ISS

But with two spots soon to be open, and as more weight sits on the Republican side of the scale, what does this mean for some of the board-related issues the SEC has been working on, such as proxy access? 

”This raises the potential of a three-member, all-GOP commission for some period of time,” says Patrick S. McGurn, executive vice president and special counsel at the proxy advisory firm Institutional Shareholder Services, who says he is not surprised to hear of Nazareth’s exit. “That's a prescription for confrontation with a Democrat-controlled Congress.”

Last week, Rep. Barney Frank (D-Mass.) said that Campos’s empty seat could cause turbulence in making changes to the current proxy process, which Frank would like to see amended.  Frank told Financial Week he feels the SEC should move back and work on the process a bit more, though he expects things to remain status quo for some time.

“Such shots across the Cox Commission's bow could become commonplace in coming months,” says McGurn.  “In some ways, these personnel moves underline what has been apparent in D.C. for some time--the Cox Commission's lame duck status.”

However, a dominant Republican panel may not be a boon to the business lobby. “While at first blush, three Republican members of the Commission and no Democrats seems like a dream come true,” says Laura Unger, a former commissioner who spent just more than four years at the SEC. It is not necessarily the case: “The Democratic Congress, which provides oversight and appropriations to the SEC, will be watching the all-Republican SEC very closely,” Unger says.  “Of course, the final rub is the election cycle.  All of these factors may slow substantially the SEC's decision making process.” Unger, a Republican, served a six-month stint as acting SEC chairman. 

Michael Ryan, executive director of U.S. Chamber of Commerce’s Center for Capital Markets, who also was not’t surprised to hear of Nazareth’s exit, does agree that the SEC should go back and reconsider the proxy process, though he’s not sure that things would be much different if Campos and Nazareth were to keep their roles as commissioners.  Still, he says Nazareth’s absence won’t be beneficial in the end.

“I think it might be a wash for the commission because she had a great deal of experience in the industry,” says Ryan.  “She had a lot of depth about the agency itself, so I think it’s a real loss.  The commission has a lot of issues on the table that needs to be addressed, and I think her background would have been very valuable.”