SEC hashes out shareholder board nomination rules

WASHINGTON (Reuters) - Securities regulators are mulling requiring shareholders to hold at least 3 percent of a large company's stock before they are allowed to nominate a board director, a person familiar with the Securities and Exchange Commission's thinking said on Monday.

The SEC is also considering a minimum two-to-three-year holding period in order to ensure that shareholders have a long-term interest in the company, the source said.

The source requested anonymity because the proposal has not been finalized and could change before the SEC meets on Wednesday to decide whether to give shareholders an easier to way to nominate board directors.

An SEC spokesman declined comment.

Currently, shareholders are able to influence the composition of the corporate board, but must wage a proxy fight in order to do so. That process is considered expensive and burdensome, according to large activist shareholders, who have been fighting for access to the corporate proxy for years.

The SEC has been divided on the issue known as "proxy access" and the two Republican commissioners are not expected to endorse the rule.

The SEC had contemplated setting the holding period at one year and creating a sliding scale ownership threshold between 1 percent and 5 percent.

But critics had argued that the one-year holding period was too short and that only requiring shareholders to own 1 percent of a large company would make it too easy for companies to fall prey to special interest groups.

The rule being hashed out by the SEC would apply to medium-sized and large-sized companies. The SEC is considering an exemption for small businesses, or companies with a public float of $75 million or less. (Reporting by Rachelle Younglai, editing by Leslie Gevirtz)