On August 25, 2010, the SEC adopted fi nal rules (i) requiring a company to include director nominees of eligible shareholders in company proxy materials pursuant to a new Rule 14a-11 (proxy access rule) and (ii) enabling shareholders to submit proposals for inclusion in a company’s proxy statement pursuant to Rule 14a-8(i)(8) seeking to amend provisions in the company’s organizational documents relating to proxy access (private ordering rule).
On October 4, 2010, the Business Roundtable and Chamber of Commerce of the United States of America fi led a lawsuit challenging the proxy access rule. As a result of the lawsuit, on October 4, 2010, the SEC voluntarily stayed its effective date of the proxy access rule and the private ordering rule. On July 22, 2011, the United States Court of Appeals for the District of Columbia Circuit issued a ruling which struck down the proxy access rule. The Court did not address the private ordering rule.
On September 6, 2011, SEC Chairman Mary L. Schapiro issued a statement1 indicating that the SEC would not seek rehearing of the decision of the Court nor would it seek U.S. Supreme Court review. In her statement, she reiterated her support for proxy access, noting that “it is a process that helps make boards more accountable for the risks undertaken by the companies they manage.” She also noted that she “want[s] to be sure that we carefully consider and learn from the Court’s objections as we determine the best path forward.”
The private ordering rule (i.e., amendments to Rule 14a-8(i)(8)) became effective on September 20, 2011.2 As a result of the private ordering rule, shareholders will have the opportunity to establish proxy access standards on a company-by-company basis during the coming proxy season. Shareholders will now be able to propose amendments to a company’s governing documents that would establish procedures under a company’s governing documents for the inclusion of one or more shareholder nominees for director in company proxy materials. These proposals could seek to include a number of provisions relating to the nomination of directors for inclusion in company proxy materials, and disclosures related to such nominations, that require a different ownership threshold, holding period or other qualifi cations or representations than those that were contemplated by the proxy access rule.3