As we reported in our October 2010 Bulletin, in August 2010 the SEC adopted a new rule 14a-11 that would have required SEC reporting companies subject to the federal proxy rules to include in their proxy materials director nominees nominated by qualifying stockholders or groups of stockholders that held at least 3% of the company’s voting power for at least three years, subject to compliance with other provisions of the rule. At the same time, the SEC amended Rule 14a-8(i) with respect to stockholder proposals to provide that companies generally could no longer exclude from their proxy materials shareholder proposals seeking to establish procedures for the inclusion of stockholder nominees in a company’s proxy materials in addition to the Rule 14a-11 process. In September 2010, the U.S. Chamber of Commerce and the Business Roundtable filed a petition with the Court of Appeals for the D.C. Circuit seeking judicial review of Rule 14a-11. Last month, the Court vacated Rule 14a-11, finding that the SEC was “arbitrary and capricious” in adopting the rule and that the SEC failed to adequately address the economic impact of the rule. SEC Chairman Mary Schapiro later put out a statement that the SEC would not seek a rehearing of the decision by the D.C. Court of Appeals or seek Supreme Court review, but that she “remain[s] committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.”
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