Filing the challenge with the U.S. Court of Appeals for the District of Columbia Circuit were the U.S. Chamber of Commerce and the Business Roundtable. The groups charged in the court document that the rule is arbitrary and capricious, violates the Administrative Procedure Act, and that the SEC failed to properly assess the rule’s effects on “efficiency, competition and capital formation.”
Specifically, the groups charged, the SEC:
- Erred in judging the costs that proxy access would impose;
- Ignored evidence and studies highlighting the adverse consequences of proxy access, including that activist shareholders would use the rule as leverage to further their special interest agendas; and
- Did not adequately consider state laws regarding access to the proxy and related principles.
“The SEC’s proxy access rule empowers unions and other special interests at the expense of the vast majority of retail shareholders,” said David Hirschmann, president and CEO of the U.S. Chamber’s Center for Capital Markets Competitiveness, in the news release. “This special interest-driven rule will give small groups of special interest activist investors significant leverage over a business’ activities. This will undermine a company’s ability to grow and create jobs.”
The SEC proxy access rule requires a corporation to include in its proxy materials director nominees put forward by a shareholder (or group of shareholders) who have owned 3% or more of company stock for at least three years (see SEC Beefs up Proxy Access Regs).
The business groups’ court petition is at http://www.uschamber.com/sites/default/files/files/1009uscc_sec.pdf.