Risk & Compliance

Proxy Access Seems ”Stale”

''Given the passage of time'' since the SEC's proposal, three companies can brush off these shareholder measures without fear of reprisal from the ...
Stephen TaubFebruary 9, 2005

The Securities and Exchange Commission will allow Verizon Communications, Qwest Communications International Inc., and Halliburton Co. to omit resolutions from their proxies that would have given certain shareholders the right to nominate directors.

Those measures were sponsored by a number of large public pension funds, led by the American Federation of State, County and Municipal Employees (AFSCME). They had hoped to take advantage of a
footnote in the SEC’s October 2003 proxy-access proposal, which said that shareholders could submit nominations for a competing slate of corporate directors, reported The New York Times.

Alan L. Beller, director of the SEC’s Corporation Finance Division, reportedly ruled that the footnote and therefore the rule itself had become stale — “given the passage of time since the proposal” — so the three companies would not be sued by the SEC for excluding those shareholder measures from their proxies.

The Times added that according to an SEC spokesman, chairman William Donaldson is still committed to changing the rules regarding director nominations even though he no longer supports the October 2003 proposal.

The SEC allowed Qwest and Verizon to omit a similar proposal from their proxies last year as well.

Gerald W. McEntee, president of AFSCME and chairman of its pension plan, said in a prepared statement that the decision “obligates the commission to make a decision about a shareholder’s right to proxy access. After almost two years of deliberation the SEC must now offer guidance and a final rule that establishes a process for how shareholders can nominate directors.”

“The staff has taken a half step backwards at a time when the commission should be taking two steps forward,” said SEC commissioner Harvey Goldschmid in a statement, according to Bloomberg. “Unfortunately, the worst instincts of the CEO community have continued to triumph.”

The Times also noted that Goldschmid, a Democrat and a strong supporter of proxy access, intends to leave his SEC seat this summer and return to teaching at the Columbia University School of Law.

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