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SEC to revisit proxy access conflict rule

SEC Chairwoman Mary Jo White
SEC Chairwoman Mary Jo White

The SEC will revisit proxy rules that allow companies to exclude shareholder proposals that are in direct conflict with management proposals, Chairwoman Mary Jo White said.

Ms. White said in a Jan. 16 statement that “due to questions that have arisen about the proper scope and application of” that exclusion to shareholder proxy access rules, she directed her staff to review it and report back. In the meantime, the SEC's Division of Corporation Finance announced that it will “express no views” on companies exercising the exclusion option in the current proxy season, which puts the practice on hold.

“CII is extremely pleased the SEC has hit the pause button on these no-action requests,” said Ann Yerger, executive director of the Council of Institutional Investors, in an e-mailed statement. “CII believes a less-restrictive interpretation is in the best interests of investors.”

CII and other investors had asked SEC officials to reconsider the proxy access exclusion following an access bylaw proposal by Whole Foods Market Inc., Austin, Texas, that would require 9% ownership for at least five years before being able to nominate directors. Securities and Exchange Commission staff approval of Whole Foods' proposal at the exclusion of a less-restrictive shareholder proposal presented “unreasonably high barriers” to shareholder nominations, CII argued.

New York City Comptroller Scott Stringer, fiduciary for the five public pension funds that make up the $158.7 billion New York City Retirement Systems, commended the SEC review. With 18 companies seeking SEC permission to exclude the pension system's proxy access proposals, “It is my hope that shareowners will soon have the right to cast votes on meaningful proxy access and other proposals,” Mr. Stringer said in a statement.

The National Investor Relations Institute, which represents corporate officers and investor relations directors, said in a statement that the SEC's “surprising reversal creates legal uncertainty for more than 40 companies that have filed similar requests with the SEC to exclude shareholder resolutions on proxy access, special meetings and other governance issues.”

In 2014, CII said its members filed nearly one-third of shareholder proposals submitted to U.S. companies.