The Council of Institutional Investors and 13 CII member pension funds urged the SEC to petition for a rehearing of the U.S. Court of Appeals case that overturned a rule to allow for shareholder proxy access.
In a letter sent Aug. 19, the CII called for a rehearing by the full appellate court in Washington.
Jeff Mahoney, CII general counsel, who wrote the letter, also said if the Securities and Exchange Commission decides instead “to reissue the final rule after addressing the concerns raised by the court, we stand ready to lend our resources to assist in that effort. Proxy access remains the number one priority of the council.”
In addition, Mr. Mahoney in the letter asks the SEC, in the meantime, to retain its stay of its rule 14a-8 and continue to ban shareholder proposals on proxy access at companies.
A three-judge panel of the District of Columbia circuit court, in a decision written by Judge Douglas H. Ginsburg, on July 22 unanimously invalidated the rule, adopted by the SEC on Aug. 25, 2010. The rule was to have gone into effect Nov. 15 last year but was suspended by the SEC on Oct. 4 after the Business Roundtable and U.S. Chamber filed a lawsuit Sept. 29 against the SEC to overturn the rule.
Mr. Mahoney wrote in the three-page letter that the court's ruling “explicitly rejected the commission's conclusions about the benefits to shareowners” of its proxy access rule “because, in the court's view, the empirical evidence was ‘mixed.' But it is precisely the role of expert agencies like the SEC — not the courts — to reach reasoned conclusions based on such ‘mixed' evidence. So long as the agency considers the relevant factors and articulates a reasoned basis for its decision — a standard plainly met by the final rule—the agency's determination should not be disturbed.”
“The (appellate) panel's failure to follow established precedent provides a strong basis for the commission to pursue a petition for en banc rehearing of the case,” Mr. Mahoney wrote. “The panel's decision does not merely delay the implementation of a critically important rule designed to benefit long-term investors and the markets; it also imposes unnecessary costs on the commission by requiring it to consider anew issues it already fully and reasonably examined.”
In the court decision, Mr. Ginsburg wrote, “(W)e think the commission has not sufficiently supported its conclusion that increasing the potential for election of directors nominated by shareholders will result in improved board and company performance and shareholder value.” The SEC failed to respond to concerns that union and state and local pension funds “whose interests in jobs may well be greater than their interest in share value, can be expected to pursue self-interested objectives rather than the goal of maximizing shareholder value, and will likely cause companies to incur costs even when their nominee is unlikely to be elected.”
The appellate court has jurisdiction for reviewing final SEC rules.
Kevin Callahan, SEC spokesman, said, “We are still considering our options.”
The funds that support the CII letter to the SEC include the California Public Employees' Retirement System and the California State Teachers' Retirement System.
