Shareholder Access and the Make Up of the Securities and Exchange Commission

As we progress in our discussion of the shareholder non-access proposal, we take a moment to note an article yesterday in the Washington Post.  The Post discussed the consequences of Roel Campos stepping down from the Commission. It is a subject we have already discussed on this Blog.  The article noted that in many ways the Commission would be deadlocked 2-2, with Chairman Cox and Commissioner Nazareth on one side and Commissioners Atkins and Casey on the other. 

For purposes of the shareholder access proposal, it means that there is currently only one sure vote, Commissioner Nazareth. While Chairman Cox has supported access in the past, he has also promised that there will be a rule by the end of the year.  To meet this promise, he must come to terms with the two opponents of access, Commissioners Atkins and Casey. This does not bode well for access. The same is true with respect to participation in Stoneridge, the primary liability case. The Commission voted by a 3-2 majority to participate, with Commissioner Campos one of the three in the majority.  If this issue were to be revisited, say in an effort to request that the Solicitor General allow the Commission to file a brief in the case directly,  there would no longer be a majority for the position.  

Nor, according to the Post, is a replacement for Campos on the immediate horizon.

• "No immediate replacement for Campos is in sight. The first step toward filling his slot must come from Congress, and senior Democratic lawmakers have not yet sent the White House any names of candidates. The nominee would require Senate approval, which could prove difficult as Capitol Hill trains its attention on the war in Iraq and next year's elections."

Advocates of access would benefit from a 2-2 split, leaving the existing regime in place for another year.  In fact, another year of experience would provide additional evidence on the significance of access whenever the Commission returned to the issue.  Nonetheless, that depends upon Chairman Cox remaining with Nazareth on this issue. 

Comments

[James McRitchie]

I'm not sure Commissioner Nazareth is a sure vote on the limited proxy access proposal. After she reads the comments, she may want to something less burdensome.

To facilitate analysis, review, and comment on the SEC's limited proxy access proposal, S7-17-07 Shareholder Proposals Relating to the Election of Directors (comments), I have posted a much abbreviated 3-page version (in Word) focusing (I hope) on the major issues. However, please note that issues important to you may have been left out entirely; other inaccuracies may have resulted from misinterpretation. Use at your own risk. I made no attempt to summarize issues raised in the Paperwork Reduction Act, Cost-Benefit Analysis, Burden on Competition, or Flexibility Analysis sections. Anyone submitting comments to the SEC should carefully review these sections and their assumptions as well as the entire SEC document. As time allows, I hope to post additional versions with comments.

You can download the summary at http://www.corpgov.net/news/news/word/SECrelease34-56160McRitchieNotes.doc

[James McRitchie]

Sorry, the above note should haver referenced "Shareholder Proposals" File S7-16-07.

[M.D. Fatwa]

There are quite a few other major issues that will also divide 2-2, and not necessarily in the same manner. For example, Nazareth and Atkins are both opposed to the foreign mutual recognition proposal that Cox sees as important to maintaining US market competitiveness (though for very different reasons). Oversight of rating agencies will also split 2-2, with Casey and Atkins in favor of opening the doors to pretty much everybody with little (if any) SEC inspections or regulation, and with Cox and Nazareth more in favor of a prudential oversight approach.