Business Consortium Asks SEC to Extend Comment Period on Shareholder Access Proposal

A consortium of business groups, including the Chamber of Commerce and the Business Roundtable, has asked the SEC to extend the comment period on the shareholder access proposal beyond the current deadline of August 17, 2009. The parties want at least another 30 days in addition to the 60 days the SEC granted. The Commission has been evaluating the proxy access issue periodically for more than 60 years, noted the business consortium, and thus there would be no harm in allowing the public at least another 30 days to respond to its current proposal.

Proposed SEC Rule 14a-11 would allow shareholders to include their nominees for director in the company's proxy materials if they have been shareholders of the company for at least one year and satisfy a minimum holdings test based on the company's market value. Shareholders would be eligible to have their nominee included in the proxy materials if they own at least 1 percent of the voting securities of a large accelerated filer, which is a company with a worldwide market value of $700 million or more or of a registered investment company with net assets of $700 million or more. Shareholders of an accelerated filer with market value of $75 million to $700 million would need to own at least 3 percent of the voting securities in order to be eligible. For a non-accelerated filer with less than $75 million, the ownership requirement is 5 percent. Shareholders would be able to aggregate holdings to meet the thresholds.

In their joint comment letter, the business groups argued that the 60-day period does not provide sufficient opportunity for the many companies, organizations and other stakeholders that would be impacted by the proposal to adequately assess and provide thoughtful commentary on the many significant, complex issues raised, including the more than 500 questions and requests for data and information. In their view, the complexity of the proposal is demonstrated by the fact that the proposal was not published in the Federal Register until almost one month after the open meeting in which the SEC approved it.

The groups also pleaded that the Commission’s requests for comments, data and information will necessitate considerable effort by commenters. For example, the Commission requests comments on proposed eligibility thresholds and possible triggers, the mechanics of proposed Rule 14a-11 and how often shareholders satisfying the proposed thresholds would invoke the rule, as well as quantitative data on the benefits and costs of enhanced shareholder access to company proxy materials and the costs to companies if the shareholder proposal rule was amended as proposed.

Further, the proposal does not include important data or provide a detailed analysis of many issues implicated by the proposed rules. Instead, the Commission has shifted the burden of data collection and analysis to the public in many respects. For example, in order to determine some of the costs of adopting the rules, the Commission explicitly relies on survey data collected by the Business Roundtable and the Society of Corporate Secretaries and Governance Professionals and submitted in comment letters on the Commission’s 2003 proposed proxy access rules.

In order to update this data, said the group, commenters will need to once again engage in detailed survey research that takes some time to complete. Similarly, the proposal contains extensive references to the analysis and commentary submitted in response to the 2003 proposing release, observed the consortium, but does not address how the value of this material has been affected by the sea change in corporate governance that has occurred in the last six years.

Finally, while noting that they are particularly well-suited to gather the data requested in the proposal and to consider thoroughly the myriad of questions raised, the organizations emphasized that it is more difficult to do so over the summer months given member travel schedules and vacation plans. For example, many of the organizations do not meet during July and August, and the responsiveness of their members to surveys and data requests during these months is likely to be lower.

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