S.E.C. Will Not Appeal Decision on Mandatory Proxy Access; Proxy Access on a Company-by-Company Basis Still a Possibility

On September 6, 2011, the Securities and Exchange Commission released a statement that it would not seek rehearing of the decision by the U.S. Court of Appeals for the District of Columbia circuit in the case captioned Business Roundtable and U.S. Chamber of Commerce vs. Securities and Exchange Commission or seek review of the decision by the U.S. Supreme Court. The decision vacated new proxy access Rule 14a-11, which would have required companies to include shareholders' director nominees in company proxy materials under certain circumstances.

However, because the plaintiffs in the Business Roundtable case did not challenge the amendments to Securities Exchange Act Rule 14a-8 that were adopted concurrently with new proxy access Rule 14a-11, these amendments will become effective on a date to be published in the Federal Register. The Rule 14a-8 amendments, which the SEC had voluntarily stayed pending a decision with respect to Rule 14a-11, allow an eligible shareholder to submit a shareholder proposal that would require a company to include future shareholder proposals regarding that company’s proxy access procedures in the company’s proxy materials. The practical effect of these amendments is that shareholders may be able to establish proxy access on a company-by-company basis if they (1) secure a majority vote in favor of a shareholder proposal providing for future shareholder proposals on proxy access and (2) secure a majority vote in favor of such a future proxy access proposal.