While companies and boards are preparing for 2014 proxy season, the Council of Institutional Investors (CII) is looking to change the rules of the game, if only it can get the Securities and Exchange Commission (SEC) on its side.
The CII has petitioned the SEC to allow shareholders to split votes in a contested corporate board election. The council seeks the ability for shareholders to vote on one ballot for any combination of management and dissident nominees that the investors believe would provide the company with the best long-term value.
In a statement to Pensions and Investments, CII Executive Director Ann Yeager said that the SEC should change the rules so that “each side in a contest can distribute 'universal' proxy cards listing all director nominees, (which) would give shareholders freedom of choice to vote for any candidate, regardless of his or her slate.” In doing so, Yeager said, the SEC could create “a fairer, less confusing and less cumbersome voting process.”
CII Director of Research Glenn Davis wrote in a letter to SEC secretary Elizabeth Murphy that the risks of shifting the voting system in this way are small, while the benefits could be large. “We believe the reform being requested would result in (little) changes in costs for proxy contest participants, and that the benefits to the shareholder voting franchise would far outweigh those costs,” Davis said.
CII says that they have not yet received any response from the SEC, saying that it is “too soon.” The SEC did not respond to P&I’s request for comment.
Allowing this sort of change in the voting structure for corporate boards would require an immediate shift in company planning entering the 2014 proxy season. Companies are already having to adjust to new rules set forth by the SEC from the past year, including new Dodd-Frank provisions that govern CEO pay disclosure. The National Association of Corporate Directors recently released a framework to help companies navigate and define the new say on pay rule.
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