Investor groups, pensions and a senior Democrat told a House panel on Thursday that two Securities and Exchange Commission proposals on shareholders’ right to nominate directors to company boards should be thrown out, Dow Jones reports.
One proposal would allow shareholders who own 5% or more of company stock for at least one year to propose amending company bylaws, and if successful at that, the shareholder would then be able to nominate a director. The second proposal would preclude them from doing so at all.
Anne Yerger, executive director of the Council of Institutional Investors, representing $3 billion in invested assets, said she prefers the status quo to the two new suggested rules. Timothy Smith, director of socially responsive investing at Walden Asset Management, testified the same.
“I think we’re going to be suggesting that they need to start over again,” said House Financial Services Committee Chairman Barney Frank (D-Mass.).
The SEC came out with the proposals after a federal appeals court said the SEC cannot continue allowing corporations to exclude shareholders’ proposals on proxies. SEC Chairman Christopher Cox has said the agency will have a rule in place before corporate annual meetings begin to take place.
Institutional investors have argued that the 5% threshold is too high. On Thursday, Donald Kirshbaum, the principal investment officer for the State of Connecticut, said the fund’s largest holding of Exxon Mobil represents only 0.07% of the company’s outstanding shares, and yet it is valued at $338 million. Five percent of Exxon would be more than $25 billion, the size of Connecticut’s entire pension fund, Kirshbaum said.
The Investment Company Institute endorsed proxy access.
The Business Roundtable, an association of CEOs of companies with annual revenues of $4.5 trillion, said allowing shareholders to propose directors would result in candidates with special interests, while at the same time discouraging independent directors from serving on the board. “Proxy access is a bad idea whose time has passed,” said Business Roundtable President John Castellani.
The SEC’s comment period on the matter ends next week.