1. The Dodd-Frank Act’s Status on Proxy Access
President Obama signed the Dodd–Frank Wall Street Reform and Consumer Protection Act into law on July 21, 2010. The Dodd-Frank Act approved the SEC proxy access rule by explicitly stating “A requirement that a solicitation of proxy, consent, or authorization by (or on behalf of) an issuer include a nominee submitted by a shareholder to serve on the board of directors of the issuer.”The Dodd-Frank Act also grants the SEC the explicit authority to issue shareholder proxy access rules and signaling Congress’s support for such rules by stating “The Commission may issue rules permitting the use by a shareholder of proxy solicitation materials supplied by an issuer of securities for the purpose of nominating individuals to membership on the board of directors of the issuer, under such terms and conditions as the Commission determines are in the interests of shareholders and for the protection of investors.”
Since the SEC had been doubted for a long time that whether they had the authority to promulgate proxy access rules, especially the doubts arose by the filing of the Business Roundtable complaint , the Dodd-Frank Act’s providing of such statutory authority to the SEC was necessary to erase such doubts. And the SEC has already taken advantages of such authority and approved a rule that allows shareholders with at least 3% of a company’s stock to include nominees for up to 25% of the directorial positions.
2. Events related to evolution of the Dodd-Frank Act
In the evolution of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there were two events that influenced the characteristics of the proxy access rules that the SEC ultimately passed.
The first event is that Senator Ch…
…han two years. Research by David Larcker et al of Stanford Business School shows that stock prices react negatively to proxy access regulations.
1. Frank, Barney. “Dodd-Frank Wall Street Reform and Consumer Protection Act.” The Library of Congress, July. Vol. 21. 2010.
2. Cohn, Jonathan, Stuart Gillan, and Jay Hartzell. “On enhancing shareholder control: A (Dodd-) frank assessment of proxy access.” Available at SSRN 1742506 (2012).
3. Sharfman, Bernard S. “Why proxy access is harmful to corporate governance.” Journal of Corporation Law 37.2 (2012): 387-413.
4. Becker, Bo, Daniel Bergstresser, and Guhan Subramanian. Does shareholder proxy access improve firm value? Evidence from the business roundtable challenge. No. w17797. National Bureau of Economic Research, 2012.
5. Fisch, Jill E. “Destructive Ambiguity of Federal Proxy Access” Emory LJ61 (2011): 435.