“We are deeply disappointed that the SEC took away the right of shareowners to use company ballots to seek approval of director election procedures,” said Rob Feckner, CalPERS Board President, in the statement. “This is a serious wrong turn from the Commission’s duty to adopt regulations that ‘do no harm’ to investors.”
“Today, the SEC nullified a federal appellate court ruling that has sustained shareowners’ right to use company ballots to post proxy access resolutions. In effect, the Commission has turned back the clock on corporate democracy by withdrawing a shareowner right that is taken for granted in other developed countries,” Feckner continued.
The SEC on Wednesday adopted an amendment to Rule 14a-8(i)(8) under the Securities Exchange Act of 1934 to codify the Commission’s longstanding interpretation of that rule. “The decision today maintains the status quo of the past decade, preserving every right that shareholders presently enjoy, while ensuring there is no unintended breach in the disclosure and antifraud protections applicable to proxy contests,” said SEC Chairman Christopher Cox, in a news release from the SEC .
Cox said the SEC will “re-open this discussion in 2008 to consider how to strengthen the proxy rules to better vindicate the fundamental state law rights of shareholders to elect directors.”
However, CalPERS Chief Executive Officer Fred Buenrostro declared in the CalPERS statement , “There have been no related legal challenges because of this illusory uncertainty. Instead of acting responsibly on this issue with a full Commission, the SEC has adopted a flawed measure that is contrary to the very purpose for which it was established.”
Twelve large pension funds, including CalPERS and the California State Teachers’ Retirement System (CalSTRS), last week asked the securities regulators to put off action on the issue (See Pension/Union Group Lobbies for SEC Shareholder Initiative Inaction ).