On July 22, 2011, the United States Court of Appeals for the District of Columbia Circuit (the “Court”) vacated the U.S. Securities and Exchange Commission’s (the “SEC”) Rule 14a-11. This “proxy access” rule was adopted shortly after Section 971 of the Dodd-Frank Act clarified the SEC’s authority to promulgate the rule. The Court held that the SEC was arbitrary and capricious in adopting the rule, thus leaving the SEC to now consider how it will proceed on the issue of proxy access.

The SEC’s efforts toward adopting a proxy access rule have been ongoing for a very long time. The SEC first solicited public comment on a proxy access rule proposal in 1942, and that proposal was never adopted. In 1977, the SEC again requested comment on whether shareholders should have access to the proxy statement for the purpose of nominating directors to serve on the board as part of a larger project examining corporate governance. At that time, the SEC concluded that due to the emerging concept of nominating committees, there was no need to propose and adopt a proxy access rule. The topic was again addressed in 1992, when the SEC rejected the notion of a universal proxy access rule in favor of the “short slate” proxy contest rules. The SEC then began considering the adoption of some form of proxy access in earnest beginning in 2003, when it proposed a rule providing proxy access to five percent shareholders upon the occurrence of certain triggering events. That proposed rule was not adopted, and in 2007 the SEC proposed, but did not ultimately adopt, a universal proxy access rule for five percent shareholders. The debate over proxy access continued following the financial crisis, and the SEC continued its rulemaking efforts beginning with a 2009 proxy access rule proposal.