Thursday, June 17, 2010

Senate Proposes Minimum Ownership Thresholds and Holding Period for Proxy Access

In the House-Senate conference, the Senate has proposed changes in the proxy access provision in the financial reform legislation that would provide for a five percent ownership threshold and two-year holding period for access to management's proxy card to nominate directors. The proposal was authored by Senator Dodd. The current proxy access provision in the legislation authorizes the SEC to implement proxy access, but provides no ownership thresholds or holding periods.

By an 8-4 vote, Senate conferees defeated a proposal by Senator Schumer that would have stricken the Dodd proposal. While he can support a holding period requirement, Senator Schumer believes that 5 percent stock ownership is too high a threshold. He explained that proxy access is a check on a company's management. It is an independent check by company shareholders who can exercise a proxy access right. While he can support a threshold, 5 percent is too high. He noted that the SEC has issued proposed proxy access rules that strike a thoughtful balance ensuring that substantial shareholders have proxy access.

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