Media reports indicate that last night, as part of the agreement of the senators and representatives on the conference committee regarding the financial reform overhaul, the senators agreed to withdraw the proposal they made last week to impose a hard wired 5% ownership threshold proxy access, and the proxy access provisions in the financial reform bill are now expected to affirm the authority of the SEC to adopt a proxy access rule without limiting the SEC’s discretion to set standards and thresholds.

This is a welcome development. As Lucian Bebchuk explained in an op-ed  in the New York Times’ DealBook section on Monday (available on the Forum here), adoption of the senators’ proposed amendment would have been a serious setback for investors and for governance reforms.  Hard wiring thresholds into legislation is inferior to letting the thresholds be set by the SEC, and adjusted over time as circumstances warrant. Furthermore, a 5% threshold would have made the proxy access provisions largely irrelevant for most long-term institutional investors, whose involvement in the director nomination process the proxy access reform is intended to facilitate.

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