UPDATE 1-Borders board sets meeting rule, names Lowe's alum

* Owners with 10 pct stake can convene special meeting

* Lowe's former SVP David Shelton named to board

NEW YORK Dec 10 (Reuters) - Borders Group Inc BGP.N said on Thursday its board of directors approved a change to the U.S. bookseller's by-laws that allows investors with a stake of at least 10 percent to convene a special shareholders' meeting.

Borders' largest shareholder as of Sept. 30, 2009 was investor William Ackman's Pershing Square Capital Management LP, which owned 17.6 percent, according to Thomson Reuters.

Other large investors as of the most recent reporting period include UBS Securities (UBSN.VX) and Barclays Global Investors (BARC.L), although none owns more than 10 percent of Borders' outstanding shares.

The second-largest U.S. brick-and-mortar bookseller also said David Shelton, a 62 year-old former senior vice president at home improvement retailer Lowe's Cos Inc (LOW.N), was elected to its board of directors.

The Ann Arbor, Michigan-based company's has struggled of late as customers continue to migrate to online vendors and rivals such Barnes & Noble Inc (BKS.N) and Amazon.com Inc (AMZN.O) launched their own electronic readers, which analysts expect will eat into in-store sales. (Reporting by Phil Wahba; editing by Andre Grenon)