NRF Asks SEC to Set Higher Threshold for Shareholder ‘Proxy Access’ in Corporate Board Elections

WASHINGTON--(BUSINESS WIRE)--The National Retail Federation is asking the Securities and Exchange Commission to set a higher threshold for the amount of stock owned when it votes this week on a “proxy access” proposal that would make it easier for shareholders at publicly traded companies to place candidates on the ballot for corporate board of director elections.

“allows a contest to be launched by too few people.”

“NRF’s members support shareholder democracy,” NRF President and CEO Matthew Shay said. “However, unlike political challenges, proxy contests involve not only policy disputes but actual disengagement of management from the operations that keep the profit-making entity afloat. Accordingly, one should be very certain that access, and the resulting contests, is supported by those who have a substantial stake and interest in the economic well-being of the company.”

Proxy contests are “time consuming and disruptive” and repeated challenges “could cause management to reorient its focus toward satisfying the disruptive shareholder’s immediate goal, regardless of the prospects of success,” Shay said.

Shay’s comments came in a letter to the SEC, which is scheduled to vote Wednesday on a long-debated proposal that would allow shareholders to demand that their candidates be placed alongside company-backed candidates on proxy ballots printed, mailed and tallied at company expense. Without “proxy access,” candidates face a more expensive and cumbersome process of sending out their own ballots and submitting them to the company. Under the version expected to be voted on, proxy access would be given to shareholders who have held at least 3 percent of stock for at least two years. Special interest groups would be allowed to aggregate their holdings in order to meet the requirement.

Shay told the commission the two-year period is appropriate but that the 3 percent level “allows a contest to be launched by too few people.” Instead, NRF supports 5 percent as a “far more appropriate balance.”

Proxy access has been debated by the SEC since at least 2003 but has been strongly opposed by the business community because of the potential disruption to a company’s operations by groups of shareholders seeking a board seat, often to voice displeasure with a company’s actions.

Chairwoman Mary Schapiro revived the issue after taking office in 2009, and the commission issued a formal proposal last year that would have allowed shareholders owning as little as 1 percent of a company’s stock for as little as one year to place candidates on the ballot. During debate of financial services reform legislation, Senator Charles Schumer, D-N.Y., proposed a 3 percent threshold, and Senate Banking Committee Chairman Christopher Dodd, D-Conn., proposed that the threshold be set at 5 percent with a minimum ownership period of two years.

In the end, the Dodd-Frank Wall Street Reform Act signed into law this summer gave the SEC authority to set regulations for proxy access but left percentages and time periods to be determined by the commission.

As the world's largest retail trade association and the voice of retail worldwide, NRF's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 countries abroad. In the United States, NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. www.nrf.com

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