Proxy Access in the United States: Revisiting the Proposed SEC Rule

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Codes, Standards and Position Papers
August 2014 | Vol. 2014 | No. 9 | 133 pages
Source: CFA Institute
Chiara Trabucchi Ellen Fitzgerald Matthew Orsagh, CFA, CIPM Robert W. Dannhauser, CFA James Allen, CFA

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Summary

Proxy access refers to the ability of shareowners to place their nominees for director on a company’s proxy ballot. This right is available in many markets, though not in the United States. Supporters of proxy access argue that it increases the accountability of corporate boards by allowing shareowners to nominate a limited number of board directors. Afraid that special-interest groups could hijack the process, opponents of proxy access are also concerned about its cost and are not convinced that proxy access would improve either company or board performance.

The US Securities and Exchange Commission (SEC) most recently attempted to give shareowners proxy access in 2010, when it passed a proxy access rule (Rule 14a-11). A lawsuit challenging the rule succeeded when the US Court of Appeals for the District of Columbia Circuit vacated the SEC’s proposed rule, holding that the SEC had failed to adequately assess the economic effects of the proposed rule. The SEC did not appeal the court’s decision.

This report attempts to address the questions raised by the DC Circuit Court by analyzing event studies on the costs and benefits of proxy access. Taken together, these studies examine whether proxy access, on the particular event date, would have been beneficial or harmful to market performance, stock performance, and board performance and whether the potential use of proxy access by special-interest groups would have reduced shareowner wealth.

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