CII Highlights ‘Troublesome' Proxy Access Bylaws

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By Yin Wilczek

Aug. 5 — The Council of Institutional Investors Aug. 5 issued a guide highlighting seven “troublesome” provisions that companies are adding in proxy access bylaw and charter amendments.

Such provisions make proxy access difficult to use or even “unworkable,” CII Interim Executive Director Amy Borrus said in a release.

“Companies that decide to adopt access mechanisms should talk to their shareowners about the approach they prefer,” Borrus added. “And they should avoid conditions that make proxy access toothless.”

Eligibility Hurdles 

The provisions include:

• a 5 percent ownership eligibility threshold;

• requiring shareholders to promise to hold their stock for a year after the election; and

• capping the number of shareholders that can aggregate their stock to meet the ownership threshold.

 

Proxy access was the major news of the 2015 proxy season, fueled in part by a shareholder proposal initiative by New York City Comptroller Scott Stringer. Stringer has indicated that he intends to push on with the measure in the next year.

More than 50 companies have now adopted, or agreed to adopt, the mechanism, which allows eligible shareholders to include their director nominees on the company's ballot.

SEC Rule 

CII has been a key participant in the debates, being one of several investor advocates who complained to the SEC that some companies were using the commission's “conflicting resolution” exemption to try to exclude proxy access resolutions from their proxy materials.

As a result of the complaints, the SEC is reviewing 1934 Securities Exchange Act Rule 14a-8(i)(9), which allows companies to exclude proposals that directly conflict with one that they intend to submit to shareholders at the same meeting.

Other observers also have suggested that companies consult with their institutional investors before tweaking their access bylaws.

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The CII guide is available at http://www.cii.org/files/about_us/press_releases/2015/08_05_15_cii_pressrelease_proxy_access_best_practices.pdf.