SEC Proposes Two Alternatives on Shareholder Access for Director Nominations in the Company’s Proxy

This post is from Theodore Mirvis of Wachtell, Lipton, Rosen & Katz.

Marty Lipton, Andrew Brownstein, Steven Rosenblum, Adam Emmerich, and David Katz have released this Memorandum on the SEC’s recent 3-to-2 vote to issue two alternative proposals on shareholder access to the company proxy for director nominations.  The first proposal would codify the Commission’s view that proposals on proxy-statement access for board nominations are excludable under Rule 14a-8–a position the Second Circuit called into question last year in AFSCME v. AIG–and the second would allow shareholders owning 5% or more of the company’s shares to include in the proxy a proposal to amend the bylaws to allow shareholders to nominate director candidates.

The Memorandum describes in detail the continuing debate over this long-running controversy, and concludes:

Well advised companies are generally very receptive and sensitive to shareholder views and concerns.  These avenues of communication tend to be more constructive than an election contest, and are almost always less disruptive.  Changes in the SEC’s rules that would facilitate more election contests at this time are both unwise and unnecessary, and indeed might only serve to channel the evolving dialogue between companies and their shareholders into a less cooperative and productive framework.

We intend to express our views again to the SEC by providing comments on the SEC’s two alternative rules proposals well in advance of the October 2 deadline.  We encourage others to do the same.

The full Memorandum is available here.

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