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$2trn global investor group urges SEC to bring in new director election rules

Some of world’s largest pension funds in plea over proxy access

A group of international pension funds and institutional investors with combined assets of over $2trn (€1.46trn) has urged the US regulator, the Securities and Exchange Commission, to issue new regulations to allow them to nominate board directors, so-called proxy access.

“We strongly urge the SEC to issue new rules on full proxy access and continue its commitment to providing long-term shareowners with the right to have a say in who runs the companies they own,” the investors said in a statement. “It’s a principle whose time has come and one that will further restore accountability, integrity, and order in our financial markets.”

Domestic US investors who have signed the statement include the California pension funds CalPERS and CalSTRS and the public pension funds of Colorado, North Carolina, Ohio, Washington State, Connecticut and the New York State and City funds.
International backers of the statement include Dutch pension fund giants APG and PGGM Investments AustralianSuper, Norway’s Norges Bank Investment Management and the Universities Superannuation Scheme.The move follows news last week that the SEC had decided not to appeal against a court ruling in a case brought by business lobby groups the Chamber of Commerce and the Business Roundtable earlier this year which invalidated the watchdog’s existing rule (Rule 14a-11). It would have required firms to include shareholders’ director nominees in their proxy materials in certain circumstances.
The decision was a major reversal for asset owners and was greeted with a chorus of disappointment from investors, who had argued the rule would “level the playing field” for director elections and bring greater accountability.

The new investor statement indicates that asset owners plan to keep the pressure on the SEC – and that the issue is unlikely to go away any time soon.

In July, the Court of Appeals for the District of Columbia Circuit said the SEC rule, part of the wider Dodd-Frank legislation in the wake of the financial crisis, was “arbitrary and capricious” and that the SEC had failed to consider the economic consequences.