Expect the Securities and Exchange Commission to abolish broker “ballot stuffing” in US board elections, reports Global Proxy Watch. SEC chair Mary Schapiro is expected to take on proxy access within the next few weeks, making it easier for shareholders to nominate directors to troubled company boards.
On February 26, the New York Stock Exchange re-filed a proposal with the SEC to eliminate brokers’ ability to vote uninstructed shares in director elections. Brokers almost always vote with management, creating a built-in block against activist efforts to hold boards accountable to shareholders. While the NYSE proposed a change in 2010, expect to the SEC to push for an earlier end, according to GPW.
The staff objected last year when then-SEC chair Christopher Cox overrode them to set aside the proposal after complaints from the business community. The final SEC ruling must await the conclusion of a 21-day public comment period that starts after the proposal is formally published this week.
In a move to make it easier for shareholders to nominate directors to troubled boards, SEC chair Mary Schapiro will have to wait. Delaware, home to more than half of large US public companies, is currently considering breakthrough amendments to state corporate law that would enable access, along with means for investors to claim reimbursement for proxy expenses. The bill, drafter by the Delaware State Bar Association, would clarify state law to allow companies to adopt proxy access bylaws.
While the proposal does not require firms to adopt them, it would be a step forward for US activists seeking the ability to challenge incumbent boards without a costly proxy fight. If passed by the state Assembly, the law would take effect August 1, after the 2009 US proxy season. Delaware’s efforts could be superseded if the SEC adopts a federal access mechanism.