The Securities and Exchange Commission has proposed giving shareholders the holy grail of corporate governance — access to corporate proxy material to nominate candidates for directors to boards. But for investors, their quest shouldn't end yet.
The SEC proposal doesn't go far enough to help remedy deficiencies in board oversight, especially to replace unresponsive directors. Investors need to persuade the SEC to revise its proposal, to make shareholder access more timely and meaningful.
The SEC deserves praise for its historic proposal that would grant shareholders, under certain circumstances, access to nominate candidates and allow contested elections.
Problems with the rule include the protracted process, over two annual meetings, for the shareholders' nominee to be placed in the corporate proxy. Among other problems is that the SEC provides only two events to trigger shareholder access. Neither makes for timely nominations for a company in an operational crisis or, worse, under investigation for fraud.
Patrick McGurn, vice president and director-corporate programs, Institutional Shareholders Services Inc., noted that if the rule had been in place this past proxy season, shareholders probably would not have triggered the nomination process at any company, even as boisterous as shareholders were in challenging corporate issues.
The knights of the shareholder roundtable shouldn't yet end their quest.