WASHINGTON (CNNMoney.com) -- The Securities and Exchange Commission on Wednesday voted to make it easier for shareholders to have a bigger say on corporate leadership at publicly-traded companies.
The new rule, which came about as a result of Wall Street reform, will allow shareholders who own 3% of company stock for at least three years to nominate candidates for director on the annual proxy ballot, which gets sent to shareholders for a vote.
"Long-term, significant shareholders should have a means of nominating candidates to the boards of the companies that they own," said SEC chairwoman Mary Schapiro.
The idea is to make it easier for shareholders to shape corporate leadership, with an eye toward holding corporate boards more accountable for decisions like rewarding executives who make risky bets.
The SEC voted 3 to 2 in favor of the new rule.
Currently, a company's existing board of directors effectively controls which director candidates are placed on the ballot that is sent to shareholders.
The rule would limit the number of potential shareholder board nominees to 25% of a company's board or 1 board director, whichever is greater.
The SEC will give smaller companies a reprieve, as smaller publicly-traded companies won't have to abide by the new rule for three years.
The commission puts some speedbumps in place to stop shareholders from gaming the new rule. For instance, it bars shareholders from borrowing stock to hit the threshold for nominating directors.
Those who oppose the move argue it will pressure companies to focus on shorter term results and empower shareholders with "parochial agendas," wrote Randall L. Stephenson, chief executive of AT&T (T, Fortune 500), in a letter to the SEC. Many other chief executives at giant companies, including Target (TGR), Union Pacific (UNP, Fortune 500) and Texas Instruments (TXN, Fortune 500) wrote similar letters.
David Hirschmann, president and CEO of the U.S. Chamber's Center for Capital Markets Competitiveness, called the move "special interest-driven." He warned that labor union pension funds would use it to "ram through their agenda."
Several Senate Republicans wrote SEC Chairwoman Schapiro to note that the new Wall Street reform law didn't "mandate" the SEC to create new rules governing proxy access and urged the Commission to be careful not to put up roadblocks for companies.
"At a time when capital formation and job creation are in jeopardy, the Commission should be particularly careful not to impose unnecessary requirements on public companies," according to the letter signed by 10 Senate Republicans, including Sen. Richard Shelby, R-Ala., who opposed the reforms.
But one SEC commissioner said the move is a long time coming.
"For far too long, shareholders have been shut out of the nominating and election process," Commissioner Elisse B. Walter said. "It is also a matter of principle to facilitate individual shareholder rights."
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