In the press and popular blogs, there appeared several goodsummaries ofthe bizarre situation now surrounding proxy access after the The United States Court of Appeals for the District of Columbia Circuit took a chainsaw to the SEC's new proxy access rule. At present, it is entirely unclear whether the SEC will appeal the harsh ruling (asI think itshould), or whether it will give up temporarily or forever.
We still have the rather strange situation that in the country that generally prides itself as being a center of shareholder democracy, even large, long-termshareholderscannot nominate directors to the board for all practical purposes (short of spending a boatload of money , that is). Whereas this simple rightis is commonplace in most other developed capital markets of the world (including Japan), -where it causes no problems -, in themanager-dominated world of U.S. capitalism and the Business Roundtable, it is adetested conceptakin toanarchy.
What is really strange about the Court's ruling is that it sets an impossibly high hurdlefor theSEC to promulgaterules of this sort. Basically, (1) overpaidU.S.executives (speaking collectively in the voice ofthe BusinessRoundtable)posited thatthey will want to contest many nominations – which assumptionwas accepted by the courtwithout any question or need for proof,itsmotivesunquestioned; (2) whereupon the SECwas then essentiallytoldthat it should haveobtained more empircal proof that thecosts ofthesesupposedly innumerableself-servingprotests will not be high…eventhoughthey are not high in other countries.They are not high in other countries for the obvious reason that investors and managementusuallyfind efficient ways to compromise in advance.Indeed, it is thishealthy pre-negotiation, in whichinvestors have aveto right of sorts,from whichresultsmuch of the value (not cost) of assuring proxy access.
Steven Davidoff wrote this in the NY Times (Proxy Access in Limbo)
The CFA Institute Blog wrote this summary (Killing it Softly)
The Harvard Law School Blog on Corporate Governanceposted this initial entry by a triumphant-soundingAdam Emmerich at Wachtell, Lipton, the firm that had submitted a memo on behalf of the Business Roundtable:
To which I made a comment, as you can see if you click on the comments tab at the bottom. For the life of me, I cannot understand why the SEC designed its rulewith aspects thatclearly attempted to compromise in advance with the Business Roundtable (much as occurs in Japan!) butrendered its case wide open to the criticism that the court made: doesn't this only serve the interests of certain large shareholders – i.e, narrow interests? I also cannot understand why the SEC seems not to have referred tothe experience of the foreign markets that haveaccess to the proxy.
The Harvard Law Forum has compiled this convenient collection of entries and comments on the general subject of access to the proxy:
http://blogs.law.harvard.edu/corpgov/tag/proxy-access/
Hopefully, we have not seen the last of this debate. If we do not, the U.S. model for corporate governance is not progressing, itregressing, having been hijacked by corporate America.
We have created a folder in the Data Librarywhere users can find some of the key documents related to the proxy access debate, including the court's decision and various memos that were filed during the comment process or the court proceedings.
Foreign > United States > Proxy Access
The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.