SEC gives shareholders power to nominate directors

By Jennifer Liberto, senior writer


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."

The rules would mostly impact board of director elections starting in 2011. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,804.80 26.65 0.15%
Nasdaq 4,765.38 16.98 0.36%
S&P 500 2,070.65 9.42 0.46%
Treasuries 2.18 -0.03 -1.27%
Data as of 8:53am ET
Company Price Change % Change
Bank of America Corp... 17.62 0.09 0.51%
Apple Inc 111.78 -0.87 -0.77%
General Electric Co 25.62 0.48 1.91%
Intel Corp 36.37 -0.65 -1.76%
Microsoft Corp 47.66 0.14 0.29%
Data as of Dec 19

Sections

New York Magazine reporter Jessica Pressler, who has been caught up in controversy this past week, will not be moving on to a new job at Bloomberg News. More

Investors beware: These 5 global crises are likely to rattle the stock market and world economy. More

Forums in dark corners of the web sell the kinds of hacks that befell Sony. More

Unilever sued Hampton Creek over its egg-free mayonnaise spread Just Mayo. But the company behind Best Foods and Hellman's mayonnaise has now dropped the lawsuit. More

The income of the top 1% jumped significantly in 2012, far outpacing inflation. Not only did this group make a larger share of the country's income, their share of total taxes also jumped from 35% to 38%. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.