Chamber of Commerce Opposes Waters Amendment on Shareholder Access

Legislation passed by the House Financial Services Committee would authorize the SEC to implement shareholder access to management’s proxy card to nominate directors for election to the board. The Waters Amendment to the Investor Protection Act would authorize the SEC to implement rules and procedures granting shareholders the opportunity to nominate at least one director to a corporation’s board of directors, a right known as proxy access. In the view of Rep. Waters, the amendment was needed because, without it, the SEC would have most likely faced a lawsuit from corporations and their industry groups alleging that the Commission lacked the authority to grant shareholders this right. The SEC proposes allowing 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.

In a letter to Committee Chair Barney Frank, the US Chamber of Commerce criticized the Waters Amendment as federalizing corporate law with a one-size-fits-all approach when what is needed is a flexible state-based approach that allows shareholders and the board to choose a governance structure that works best for the company. Delaware has enacted legislation clarifying the authority of companies and their shareholders to adopt proxy access and proxy reimbursement bylaws, noted the Chamber, and an American Bar Association committee is addressing similar amendments to the Model Business Corporation Act on which 30 state corporate statutes are based. Coming at this time, said the Chamber, the Waters Amendment would deprive shareholders of existing rights and weaken existing corporate governance structures. Moreover, the Waters Amendment would disenfranchise individual investors and empower special interests.

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