The Securities and Exchange Commission recently proposed allowing large shareholders such as mutual funds to name their own board candidates on company ballots for the first time. The proposed rule change would apply only to large shareholders and only be triggered by a specific set of circumstances, such as dissenting votes by large numbers of stockowners. In my opinions CEO’s should support this new practice.
Real representatives of shareholder interests are needed on corporate boards now more than ever (William, 2003). This would introduce a fresh perspective to the board and encourage increased responsiveness and accountability to shareholders. By providing an efficient means for shareholders to nominate candidates and communicate with other large, long-term shareholders, a shareholder right of access to the company’s proxy would help bring accountability to our system of corporate governance.
While state law does provide shareholders with the right to nominate their own candidates for board directorships, the reality is that for most investors, even large institutional investors like our funds this right remains effectively unavailable so long as shareholder nominees are denied equal access to the proxy. Incumbent directors can freely spend the corporate treasury to get re-elected to the board, while shareholder candidates are forced to mount largely cost prohibitive proxy fights in order to reach shareholders. “The intent of the SEC in proposing the rules is to create a mechanism for nominees of long-term security holders with significant holdings to be included in company proxy materials where there are indications that the proxy process has been ineffective or that security holders are dissatisfied with the process.” (Brian, 2003)
The proposed SEC rule would make it easier for some shareholders to nominate directors. Currently, a company's board of directors controls the nominations, which are sent to shareholders in the annual proxy statement (Rachel, 2003)....
