Thousands React to SEC Proxy Access Proposals

Harvard Law Professor Lucian Bebchuk was among the thousands of interested parties to comment on two proposals now before the Securities and Exchange Commission that seek to increase shareholders’ ability to nominate and elect directors by utilizing a company’s proxy materials.

The letter, written by Bebchuk and signed by 39 law professors from 24 different universities, was filed just prior to the close of the public comment period last week on the proposed SEC rules known as S7-16-07 and S7-17-07. In the letter, Bebchuk urged the SEC to adopt neither shareholder proposal. “In our view, both proposals would produce unnecessary and undesirable impediments to shareholders’ exercise of their right under state law to initiate bylaw amendments concerning shareholder nomination of directors.”

While noting there is “substantial disagreement” regarding the merits of proxy access bylaws, Bebchuk said the signatories were “unanimous…in our strong belief that shareholders should be allowed to make the decision on this subject for themselves, and that companies should not be allowed to make the decision for them by excluding proposed bylaw amendments from the corporate ballot.”

“In our view, both proposals would produce unnecessary and undesirable impediments to shareholders’ exercise of their right under state law to initiate bylaw amendments concerning shareholder nomination of directors.” --Lucian Bebchuk, Harvard Law

The comments will now be reviewed by SEC staff and a recommendation made to the chairman who next would schedule a public meeting. Other than his public comment to have resolution on the proposals before the start of the 2008 proxy season, SEC chairman Christopher Cox is under no mandate, legal or otherwise, to bring the process to a close.

The two proposals contradict each other, with one allowing companies to continue excluding shareholder nominations to the board and the other restricting them through tight guidelines (Directorship, “The Battle Brewing Over Director Elections,” October/November 2007).