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By Yin Wilczek
April 1 — The U.S. is well on its way to achieving “viable proxy access,” New York City Comptroller Scott Stringer said April 1.
In a speech to institutional investors, the trustee of the $160 billion New York City Pension Funds said there has been a “seismic shift” for the proxy access mechanism in the few months since he and others submitted a raft of proxy access proposals to companies.
“Today, it's no longer a question of whether companies will adopt proxy access; the real question is when,” he said.
Stringer added that the immediate focus now is the 100 or so companies that are opposing proxy access proposals on their ballots this year. “The bottom line is that investors in this room have the votes to make sure that these changes take place,” he said.
Stringer spoke at the Council of Institutional Investors' spring conference in Washington.
In an initiative known as the Boardroom Accountability Project, Stringer and other institutional investors last fall jumpstarted proxy access by submitting resolutions at 75 corporations asking that certain shareholders be allowed to include their director nominees on the company's ballot.
The initiative gained even more prominence after many companies tried to rely on an exclusion—1934 Securities Exchange Act Rule 14a-8(i)(9)—to omit such proposals from their proxy materials on the basis that they had conflicting management resolutions. The outcry from shareholder proponents caused the SEC to suspend its no-action process with respect to the rule pending staff review.
Prominent institutional investors also have stepped forward, threatening to vote against directors that impede proxy access at their portfolio companies.
Since then, more than 10 companies—including General Electric Co. and Prudential Financial Inc.—have enacted proxy access bylaws while others are supporting access resolutions submitted by their shareholders.
However, many companies are opposing access proposals, including Noble Energy Inc.
Stringer's proposal asks that shareowners holding at least 3 percent of stock for three years or more have the ability to nominate up to 25 percent of the board. It mirrors the proxy access thresholds recommended by the SEC in a federal rule that was invalidated by the U.S. Court of Appeals for the District of Columbia in July 2011.
“We still need a universal rule from the SEC but that’s unlikely to happen anytime soon,” Stringer told the audience, echoing recent comments by SEC Chair Mary Jo White. He added that he is hopeful that many more companies will voluntarily engage with their shareholders on proxy access.
“The fact is we want proxy access at all of our portfolio companies, regardless of their governance, board or performance,” he said.
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