Law Professors Submit Amicus Brief in Proxy Access Case

Editor’s Note: This post relates to a brief submitted by 36 law professors, including Professor Coates and Professor Victor Brudney, in the case of Business Roundtable and Chamber Of Commerce v. SEC. Boston College Law Professor Kent Greenfield led the organization of the group, and the brief was written by Jay Eisenhofer, Michael Barry and Ananda Chaudhuri of Grant & Eisenhofer P.A. The amicus brief is available here. The brief relies on the recent Harvard Law Review article by Lucian Bebchuk and Robert Jackson, Jr, “Corporate Political Speech: Who Decides?” which is described on the Forum here.

For seven years, the SEC deliberated whether to give shareholders direct access to the proxy statements mandated by federal law. After the Business Roundtable and others raised doubts about the SEC’s authority to adopt proxy access, Congress considered for nearly a year whether to intervene and mandate it by statute. In the end, Congress simply elected in the Dodd-Frank law to remove any doubt as to the SEC’s authority in the area. At long last, the SEC in September adopted Rule 14a-11, which requires public companies to distribute information about candidates nominated by shareholders that have held 3+% of the voting stock for 3+ years.

A bare two weeks later, the Business Roundtable and the US Chamber of Commerce filed suit in the DC Circuit attacking the rule. In a brief signed by Eugene Scalia, son of US Supreme Court Justice Antonin Scalia, the two groups argued, among other things, that the rule violated the First Amendment by forcing public companies to “carry campaign speech” of “third party” “outsiders.”

Last week, following the SEC’s submission of its brief in the case, a group of 36 law professors — including Harvard Law School Professors Victor Brudney and John Coates — joined an amicus brief responding to the arguments advanced by plaintiffs in the case. As the brief notes, the law professors do not hold the same views on the merits of or underlying policies behind Rule 14a-11, and differ on many issues concerning corporate governance and corporate law and policy. But the law professors are in agreement that Rule 14a-11 does not violate the First Amendment.

Among other things, the law professors’ brief points out that all of the First Amendment arguments advanced by plaintiffs would argue against the constitutionality of the SEC’s long-standing Rule 14a-8, which the Business Roundtable and Chamber of Commerce specifically chose not to challenge. More substantively, the brief emphasizes, shareholders are not “outsiders” or “third parties” to a corporation, but play a crucial role in a corporation’s “internal governance.” Shareholders would have undisputed rights to speak at a shareholder meeting — which the proxy rules attempt to reproduce for companies with widely dispersed shareholders. Perhaps most importantly, the Congress and the SEC have for over 70 years regulated securities by requiring disclosure. To subject the federal securities laws to strict First Amendment scrutiny would eviscerate the capital markets and impede capital formation at a moment when the nation’s economy most needs new investment.

Given the First Amendment issues at stake, and the importance and breadth of the laws being implicitly challenged, it was both ironic and predictable that the Business Roundtable and US Chamber of Commerce would immediately file a brief arguing that the DC Circuit should not allow the law professors to file their brief.

Post a comment or leave a trackback: Trackback URL.

One Trackback

  1. […] concerns in ways that can open up the space for dialogue and maybe even collaboration.  And, once proxy access emerges from litigation directorship campaigns will become a compelling priority.  (Within days after the SEC ruling on […]

Post a Comment

Your email is never published nor shared. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

  • Subscribe

  • Cosponsored By:

  • Supported By:

  • Programs Faculty & Senior Fellows

    Lucian Bebchuk
    Alon Brav
    Robert Charles Clark
    John Coates
    Alma Cohen
    Stephen M. Davis
    Allen Ferrell
    Jesse Fried
    Oliver Hart
    Ben W. Heineman, Jr.
    Scott Hirst
    Howell Jackson
    Robert J. Jackson, Jr.
    Wei Jiang
    Reinier Kraakman
    Robert Pozen
    Mark Ramseyer
    Mark Roe
    Robert Sitkoff
    Holger Spamann
    Guhan Subramanian

  • Program on Corporate Governance Advisory Board

    William Ackman
    Peter Atkins
    Joseph Bachelder
    John Bader
    Allison Bennington
    Daniel Burch
    Richard Climan
    Jesse Cohn
    Isaac Corré
    Scott Davis
    John Finley
    David Fox
    Stephen Fraidin
    Byron Georgiou
    Larry Hamdan
    Carl Icahn
    Jack B. Jacobs
    Paula Loop
    David Millstone
    Theodore Mirvis
    James Morphy
    Toby Myerson
    Morton Pierce
    Barry Rosenstein
    Paul Rowe
    Rodman Ward