Major Investors Back Proxy Access

Institutional investors overwhelmingly support the Securities and Exchange Commission’s proposed rules that would open up the director nomination process, according to a survey by Broadgate Consultants Inc.

Nearly 80 percent of the 120 buy-side money managers and research professionals who responded said they believe the SEC’s proposals are a good step toward better governance.

The commission initially trotted out its recommendations last fall. But after receiving a record number of comment letters, the SEC decided to delay the issuance of its final rules, and hosted a roundtable discussion in the winter. Many observers had expected that the SEC would issue its final rules in May, but now it seems that will happen later rather than sooner.

The initial proposed rules, known as the proxy access rules, are still fairly restrictive. They require a two-step process that would take two years before certain large shareholders could nominate their own candidate to a company’s board of directors.

While pension funds have been very supportive of the proposed rules, major corporate advocates such as the Business Roundtable have aggressively lobbied against them, arguing that the rules will affect many companies that don’t deserve outside proxy access.

Other results from the survey:

• About three-quarters of respondents said they believe that the board structures of mutual funds need to be reformed.
• More than one-third believe the push for governance reform has gone too far and now risks undermining the credibility of its supporters; another 12 percent are not sure.
• More than one-third think that public pension funds such as Calpers are trying to wield too much power.
• Fully 53 percent believe the landmark legislation has been effective in promoting better corporate governance and protecting investors; 21 percent believe it has not been effective.