SEC Draws Shareholder Activists Map for Proxy Initiatives

July 15, 2005 ( - Federal regulators have released a detailed roadmap for how shareholders can successfully get certain types of proxy initiatives on a company's annual meeting agenda.

In their  recently released guidance , staff members of the Securities and Exchange Commission (SEC) spelled out the do’s and dont’s for drafting shareholder proposals, including demanding that the roles of chairman and CEO be split, according to a Dow Jones report.

The SEC staff members explained that as long as the resolutions don’t box companies in for the duration of their corporate lives, the agency will give such shareholder proposals the green light to appear on the annual meeting agenda for a shareholder vote.

However, proposals drafted to require that a particular director remain independent “at all times” would be considered suspect under a provision of the federal proxy rules, which allows companies to block shareholder resolutions if the company lacks “the power or authority to implement the proposal,” according to the news report.

The division of corporation finance bulletin also laid out the staff’s view of what environmental and public health proposals will pass muster.

The issue of board chair and director independence has been an extremely hot issue in recent years with a number of activist institutional investors fighting to get proxy initiatives on that topic and others in front of shareholders (See SEC Staff Approves Pensions’ Disney Proxy Proposal ).