Until the Securities and Exchange Commission opens up the corporate proxy ballot to shareholder nominees, it ought to declare that companies can no longer use the term "election" in regard to shareholder voting for candidates to the board of directors.
Instead, the process should be called a ratification, just as shareholders now ratify — rather than elect — auditors.
A decision by the SEC's division of corporation finance on Dec. 28 is the latest example of how the SEC continues to reject opening shareholder access to the corporate proxy ballot in a limited fashion to nominate directors. The decision let Walt Disney Co. omit a shareholder proposal requesting access under certain circumstances. The SEC has allowed its own proposal for limited access to languish since it was introduced in October 2003.
The only way shareholders now can make nominations is by forcing a proxy contest using a separate proxy ballot with a dissenting slate of directors. Companies can, of course, voluntarily offer shareholder access. Two companies have opened their proxy ballots: Apria Healthcare Inc. and Hanover Compressor Co.
Under the current setup at companies, shareholders who oppose a director can at best "withhold" shares in the voting.
The SEC, the arbiter of corporate disclosure, owes it to shareholders, too, to be more transparent and clarify the proxy access rule, giving shareholders guidance on how to write a proposal on proxy access so they can at least vote on opening the process, even if the SEC itself won't vote to change it.