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The Securities and Exchange Commission announced late Tuesday that it would not seek an appeal of a decision by the U.S. Court of Appeals in Washington, D.C., over its so-called “proxy access” rule. The rule would have made it easier for shareholders to vote out corporate directors.
Some of the debate over the proposed rules centered on whether the SEC had the authority to adopt such rules, Schapiro said. But the Dodd-Frank Wall Street Reform and Consumer Protection Act, she said, "specifically states that the SEC has authority to adopt rules that require companies to include shareholder board nominees in company proxy materials."
The SEC’s decision is seen as a victory for business groups, including the Chamber of Commerce and the Business Roundtable, both of which sued to block the rule.
"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,” SEC Chairman Mary Schapiro said in a statement. “It is a process that helps make boards more accountable for the risks undertaken by the companies they manage. I remain committed to finding a way to make it easier for shareholders to nominate candidates to corporate boards.”
However, she added, "At the same time, I want to be sure that we carefully consider and learn from the court's objections as we determine the best path forward. I have asked the staff to continue reviewing the decision as well as the comments that we previously received from interested parties."
The SEC originally voted on the rule on Aug. 25, 2010 which was to take effect this year. The agency passed the controversial rule by a 3-2 vote, with both Republican commissioners casting dissenting votes.
At the time, Schapiro stated before the vote that "the concept that shareholders can directly participate in the director nomination process—without having to mount a proxy contest—has been debated for over 30 years." In fact, she continued, "this is the fourth time in recent memory that the commission has considered the question of amending our proxy rules to address so-called 'proxy access.' "
SEC Commissioner Kathleen Casey, who voted against the rule along with Commissioner Troy Paredes, called the "proxy access" rules "fundamentally flawed" and "unnecessary," adding that adoption of the rule would be "damaging to our capital markets."