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SEC says proxy vote rule won’t make 2011 AGM season, CalSTRS threatens legal action

Review cited for summer of 2011 after Chamber of Commerce challenge.

The US Securities & Exchange Commission has said it does not expect proxy access (the ability to nominate company directors for a shareholder vote) to be available to investors for the 2011 AGM season, following a legal challenge from the US Chamber of Commerce and Business Roundtable. The legal action taken at the end of September by the Chamber of Commerce has prompted California State Teachers’ Retirement System (CalSTRS), the $131.8bn scheme – the second largest in the US – to threaten its own legal riposte against what it called a “roll back” on shareholder rights. The SEC said it would seek a court ruling by the summer of 2011 with a view to introducing the proxy right in 2012. It said the stay “necessarily means that the Commission’s rule changes will not be available for use by shareholders during the 2010-2011 proxy season.” In August, the SEC approved rules to giveshareholders who own 3% of a company’s stock for at least three years the right to have their board nominee included in companies’ proxy materials. The process was prohibitively expensive prior to the ruling. The Chamber of Commerce argues that the rule is “arbitrary and capricious, and that the SEC failed to properly assess the rule’s effects on ‘efficiency, competition and capital formation’ as required by law”. However, CalSTRS said it would “explore all possible options, including legal strategies” to oppose the Chamber’s legal challenge.
Jack Ehnes, CalSTRS chief executive officer, said: “As an institutional shareholder with a long time horizon, CalSTRS is interested in the long-term growth and success of its portfolio companies. Our ability to change our representatives in the boardroom is fundamental to good corporate governance and shareholder democracy.”