The SEC should bar companies from opting out of a proposed rule that would allow shareholders to nominate directors in the corporate proxy materials, according to Keith Bozarth, executive director of the $78 billion State of Wisconsin Investment Board, Madison, and Theresa J. Whitmarsh, executive director of the $70.5 billion Washington State Investment Board, Olympia.
Alexander M. Cutler, chairman of the corporate leadership initiative of the Business Roundtable and chairman and CEO of Eaton Corp., suggested in an Aug. 17 comment letter that instead of an SEC-imposed “one-size-fits-all” federal mandate, state law should prevail allowing companies to decide on amending their corporate bylaws to provide for shareholder access.
Both Mr. Bozarth and Ms. Whitmarsh, in separate comment letters submitted to the SEC last week about its proposed rule, said they oppose any provision in which companies or shareowners would decide what” degree of access, “if any, is appropriate.
Some opponents argue that a federal rule is unnecessary given recent changes to Delaware corporate law allowing companies or investors to adopt proxy access bylaws, wrote Jonathan D. Urick, analyst, Council of Institutional Investors, in a six-page comment letter submitted Jan. 14.
“From a practical standpoint, leaving proxy access to Delaware and other states could result in a hodgepodge of standards that would differ from company to company and from state to state. This would be burdensome, costly and unnecessarily complex for investors, particularly those like council members with diversified portfolios of thousands of companies incorporated in multiple states.”
In addition, he noted research by the CII and ShareOwners.org, an advocacy group, found “many companies have supermajority voting requirements to amend the bylaws making shareowner-proposed proxy access bylaw amendments nearly impossible to implement.”
Mr. Bozarth explained in his letter: “Unless proxy access is adopted at a federal level, shareowners would continue to face restrictions on corporate governance.”
“Companies most in need of governance improvements are those most likely to opt out of a proxy access rule,” Mr. Bozarth wrote.
“The recent economic crisis has highlighted the need for enhanced accountability of boards for their stewardship responsibilities,” Mr. Bozarth wrote. “Reasonable access to corporate proxy materials for long-term investors would address some of the problems surrounding director elections. Such access could significantly enhance the U.S. corporate governance model.”
Ms. Whitmarsh expressed similar views in her letter.