By James Hamilton, J.D., LL.M.
In a recent speech at a London conference on governance, SEC Commissioner Roel Campos said it was ironic that he was asked to defend the lack of shareholder proxy access in the U.S. since he has been its strongest advocate. Campos said the SEC is on the wrong side of this issue and the current system for electing directors is an ``absolute joke.’’ Even large institutional shareholders have virtually no choice in the election of directors, Campos explained.
Many companies have adopted majority voting requirements, Campos noted, but they are often voluntary. The majority voting provisions to do not permit shareholders to nominate a director but make it easier to vote directors off of the board. Campos said the lack of proxy access in the U.S. is “a distinct negative.”
Campos said he has done all that he can to establish proxy access in the U.S. When the issue was before a federal appeals court last year, Campos explained that he had insisted that the SEC not formally submit a brief that supported the status quo. The court ruled in favor of the shareholders, which gave them access to the corporate proxy. The SEC must now decide what action to take, and Campos made clear there was no consensus view among the commissioners
Campos urged a letter writing campaign to bring about change, emphasizing the economic benefits of proxy access such as the potential for increased European investments. The SEC is at a critical point and European investors may make a difference, he explained
While conceding that one aspect of the U.S. governance system needs work, the commissioner refused to concede that the U.S. market is unattractive to foreign investors. He said that one of the great strengths of the U.S. market is the system of high standards and protections of capital. He posited that investors appreciate and desire this high level of protection for capital. Indeed, the available data indicates that savings in the cost of capital for companies cross-listed on the U.S. are several times greater than the costs of complying with U.S. regulations.