“Wait a SEC”
At the much-awaited SEC “open meeting” on December 13, the five sitting Commissioners decided not to consider amendments to Rule 14a-8(i)(8) which, as written, effectively prevents shareholders from nominating corporate board members. This was the second such postponement in as many months. The Commissioners felt the issue is still too “divisive,” reflecting major disagreement on the subject between corporate management and boards, and large institutional investors. Since the SEC was recently criticized by the U.S. Court of Appeals for the Second Circuit for permitting AIG to exclude a shareholder access procedure proposal from its proxy in 2005, this latest postponement will probably mean more such proposals will hit company desks in the 2007 proxy season, with no “relief” from the SEC.
Separately, at this same SEC meeting, the Commission voted to adopt proxy rule amendments, effective July 1, 2007, formally allowing companies the option to deliver proxy materials to shareholders through “notice and access,” meaning advise holders 40 days in advance of the annual or special meeting that proxy materials can be viewed over an Internet site. This approach has already been used to varying degrees by corporations in recent years, but the rule change will serve to “institutionalize” the practice and obviously expand the extent to which corporations save money by not having to print and mail paper. (Shareholders still wanting paper-based materials must be sent them within 3 days of such request.) Banks and brokers will have to mirror this notice and access approach for “street” holders of corporations that choose it for its registered holders, but banks and brokers already understand this practice quite well through their work with strategic vendor ADP. Besides saving companies money and facilitating participation in the voting process by tech-savvy investors, the rule change will also make it easier for “soliciting parties” to reach company investors with their particular agendas; however, they will have to follow the same strict rules surrounding the notice and access method as the company itself.