Securities Law

Competing Shareholder Plans Advance

The Securities and Exchange Commission has voted to seek public comment on two competing proposals dealing with shareholder influence on corporate boards.

At issue is whether shareholders may change corporate bylaws to allow them to advance their own director nominees.

One proposal bars shareholder proposals for election bylaw changes, and the other permits them if offered by shareholders owning at least a 5 percent stake in a company. (See this post for more information.)

SEC Chairman Christopher Cox voted with Republican commissioners to issue for comment the restrictive shareholder proposal and with Democrats to issue the 5 percent proposal, the Washington Post reports.

Republican commissioner Paul Atkins asked whether the SEC had the authority to approve the 5 percent plan and complained it could bring about a “tyranny of the minority, the Post reported.

Cox is trying to find a compromise between the two board factions, the New York Times reports. The commission is acting in response to a federal appeals court decision holding the commission had misinterpreted a rule when it allowed a company to exclude a shareholder election proposal.

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