SEC Elects Not to Appeal Proxy Access Decision


On September 6, 2011, the Securities and Exchange Commission (SEC) announced that it would not seek either a rehearing by the Court of Appeals or an appeal to the U.S. Supreme Court of the recent decision vacating its proposed proxy access rule.1 As proposed, the rule would have required many companies to include shareholder director nominees in their proxy materials in certain circumstances.2

In announcing the SEC's decision, Chairman Mary L. Schapiro stated that she "remains committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards." However, she also signaled that the SEC was unlikely to engage in a rewrite of the proxy access rules in the near future, as she has "asked the [SEC's] staff to continue reviewing the decision as well as the comments that [the SEC] previously received" so that the SEC may "carefully consider and learn from the [decision in order to] determine the best path forward." As a result, it is reasonable to assume that the SEC will not revisit mandatory proxy access for some time.

Notwithstanding its decision not to appeal, the SEC confirmed that the previously proposed amendments to Rule 14a-8—the effectiveness of which had been voluntarily stayed by the SEC pending the outcome of the litigation challenging the larger proxy access rule—would become effective on September 13, 2011, "absent further [SEC] action."3 These amendments permit eligible shareholders to include proposals regarding the adoption of proxy access procedures in a company's proxy statement through the Rule 14a-8 shareholder proposal process. As the SEC stated, through "this procedure, shareholders and companies have the opportunity to establish proxy access standards on a company-by-company basis—rather than a specified standard like that contained in" the proposed proxy access rule.

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