Proxy access enables shareowners in certain circumstances to nominate individuals for company boards of directors directly through company proxy statements. US rules have restricted the ability of shareowners to nominate individuals to company boards of directors directly through company proxy statements.
Since 2002, the SEC has twice tried to enable shareowners to directly submit board nominees, but in each case, federal courts struck down its rules.
Most recently, the SEC, under authority of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), gave investors proxy access when the nominating shareowner or group owned at least 3% of the company’s shares for at least three years. In 2011, the Court of Appeals for the District of Columbia vacated the rule, saying the SEC failed to address whether the rule would facilitate enough election contests to be of net benefit.
CFA Institute Viewpoint
The proxy process should provide mechanisms that enable shareowners to nominate directors under certain circumstances. Such mechanisms should not be used to further the interests of nominating investors, promote their agendas, or benefit anyone other than shareowners.
Directors should act on behalf of shareowners by overseeing corporate management. Giving shareowners reasonable involvement in the nominations process will help make board members and nominees more accountable.
Preliminary results from a research report commissioned by CFA Institute, Proxy Access in the United States: Revisiting the Proposed SEC Rule, suggest that the real-world benefits to investors of an expectation that shareowners would have access to the company proxy statement are positive.