Proxy Access Update: Proposed Legislation Would Bolster SEC Authority on Proxy Access

November 11, 2009

Momentum on federally-mandated proxy access continues to grow.  Although the original target—putting a new regime in place for the 2010 proxy season—turned out to be unworkable in light of the SEC’s late start, the complexity of the rules and the volume of comments, Chairman Mary Schapiro recently reiterated that the SEC intends to adopt proxy access rules in early 2010.  Commissioner Elisse Walter has indicated that they are carefully considering whether to include an "opt-out" mechanism upon shareholder approval.  New rules could be effective in 2010 for companies with midyear or later fiscal year ends.


A fundamental question continues to be whether the SEC has the statutory authority to promulgate prescriptive federal standards.  Action is underway in both houses of Congress to empower the SEC and to moot or at least blunt potential court challenges to the new rules:

  • Last week, the House Finance Services Committee passed the Investor Protection Act.  The Act gives the SEC explicit authority to prescribe rules and regulations and procedures relating to the inclusion of shareholder nominees in a company's proxy solicitation. Our memo on the bill is here.
  • Yesterday, Senate Banking Committee Chairman Christopher Dodd introduced the Restoring American Financial Stability Act of 2009.  Although press coverage has focused on the Act’s dramatic overhaul of financial institution regulation, the Act also includes the provisions from Senator Schumer's Shareholder Bill of Rights that could affect all public companies.  Among the provisions is explicit authority delegated to the SEC to adopt proxy access rules, largely mirroring the House version.  We will publish a memo on the corporate governance and executive compensation provisions, and on the financial reforms in the near future

Enactment of either bill remains uncertain, in part because they are both complex, multi-element efforts that address numerous controversial financial regulatory issues.  Congressional support for proxy access, however, appears to be clear, and thus it is quite possible that these provisions could be adopted on a standalone basis or as part of other, less controversial legislation.  We will continue to monitor and report on the regulatory and legislative developments.


If you have any questions regarding this newsflash, please contact any of the lawyers listed below or your regular Davis Polk contact.

Ning Chiu 212 450 4908
William M. Kelly 650 752 2003
Phillip R. Mills 212 450 4618
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