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SEC wisely decides against 'proxy access' appeal

Sep 7, 2011
Carter Wood

Chairman Mary Schapiro of the Securities and Exchange Commission announced late Tuesday that the SEC will not appeal the U.S. Court of Appeals for the D.C. Circuit’s decision in July that found for Business Roundtable and U.S. Chamber of Commerce in a lawsuit over proxy access. It's a good move, incrementally advancing the cause of regulatory restraint.

The court vacated the SEC’s rule, agreeing with the business groups’ that the commission has failed to do the economic analysis of its proposed rule as required by law.

“I want to be sure that we carefully consider and learn from the court’s objections as we determine the best path forward,” Schapiro said in a statement.

The rule sought to give outside groups – think organized labor and “social investors” – easier access to board of director ballots, undermining the primacy of management, directors and shareholders in running a business. As Business Roundtable President John Engler said in a statement after the court’s ruling:

By vacating the rule, the court has effectively placed great importance on the long-term interests of shareholders and businesses alike.  The judges agreed with Business Roundtable and the Chamber of Commerce that the Commission failed to do what was required and that’s to consider the rule’s impact on efficiency, competition and capital formation.  This ruling will help company management and boards pay attention to the creation of long-term shareholder value under strong and transparent rules of corporate governance.

Schapiro still held out the possibility of SEC action on proxy access. From her statement:

I firmly believe that providing a meaningful opportunity for shareholders to exercise their right to nominate directors at their companies is in the best interest of investors and our markets. I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.

Perhaps that’s just an agency’s face-saving, but Schapiro’s insistence just reinforces the uncertainty that has so discouraged investment and economic growth. In any case, after the court’s ruling we trust the SEC will now give more attention to following the statutes and actually doing the rigorous economic analysis required of it -- economic analysis that will serve the cause of regulatory restraint.

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Senior Communications Advisor
Business Roundtable

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