The Battle for Proxy Access Isn’t Over Yet

Yesterday the U.S. Chamber of Commerce and the Business Roundtable announced the filing of a joint lawsuit challenging the Securities and Exchange Commission’s adoption of proxy access Rule 14a-11 as, among other things, arbitrary and capricious and in excess of the Commission’s authority.  In a joint press release, members of the Chamber of Commerce assert that:

The SEC’s proxy access rule empowers unions and other special interests at the expense of the vast majority of retail shareholders … [and] will give small groups of special interest activist investors significant leverage over a business’ activities. …  The SEC failed to engage in evidence-based rulemaking, and we intend to hold the SEC to its statutory obligation to conduct a thorough cost-benefit analysis.

The groups also filed a motion requesting that the Commission stay Rule 14a-11, including its November 15, 2010 effective date, pending resolution of the suit.  The Commission has until October 5, 2010 to respond, but in a preliminary statement, as reported by Bloomberg News, a spokesman for the Commission stated that:

We believe that the commission’s proxy-access rules are both lawful and in the best interests of the public and shareholders. The commission will, of course, carefully consider and timely respond to the motion for a stay.

So, unless and until the Commission or the Court of Appeals stays the effective date, if you mailed your proxy materials out on or after March 15, 2010 you should continue to anticipate Rule 14a-11 affecting your 2011 proxy season.  Also of note, the motion is not seeking a stay of the amendments to Rule 14a-8 so, regardless of its outcome, those amendments will be effective on November 15, 2010.

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