Proxy Access: Best Practices

This post is based on a report from the Council of Institutional Investors. The complete publication, including charts, is available here. Related research from the Program on Corporate Governance about proxy access include Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

 

The Council of Institutional Investors (CII) believes that proxy access is a fundamental right of longterm shareowners. Proxy access—a mechanism that enables shareowners to place their nominees for director on a company’s proxy card—gives shareowners a meaningful voice in board elections.

CII’s members-approved policy on proxy access states, in part:

Companies should provide access to management proxy materials for a longterm investor or group of long-term investors owning in aggregate at least three percent of a company’s voting stock, to nominate less than a majority of the directors. Eligible investors must have owned the stock for at least two years.

CII also generally supported a similar approach to proxy access that the Securities and Exchange Commission (SEC) adopted in 2010 but later vacated after a court challenge.

Given the many shareowner proposals seeking proxy access that received majority support during the 2015 proxy season, dozens of U.S. public companies have implemented access bylaw or charter amendments. More are considering adopting access mechanisms.

But some of those companies have included, or are considering including, in proxy access mechanisms provisions that could significantly impair shareowners’ ability to use proxy access, or even render access unworkable.

The chart in the complete publication highlights the most troublesome provisions that are of concern to CII and many of our members, and CII’s position on them based on existing CII policies and related public statements. CII urges companies that decide to adopt access mechanisms to talk to their shareowners about the approach they prefer and to avoid requirements that make access difficult to use or toothless.

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