* SEC has proposed proxy access rules
* Senators backing 5 percent threshold
* Big investors say that's too high
By Rachelle Younglai
WASHINGTON, June 17 Giving shareholders more
say on how companies are governed has emerged as one of the
sticking points for U.S. lawmakers negotiating the final
financial regulation bill.
Senate negotiators agreed on Thursday to only allow
shareholders owning at least 5 percent of a company for more
than two years to nominate a corporate board director.
There is "real angst" over the Senate's proposal,
Democratic Representative Barney Frank said.
Frank is leading negotiations to merge the House of
Representatives' regulation bill with the Senate's version.
Both bills affirm the Securities and Exchange Commission's
authority to give shareholders "proxy access" or access to the
corporate proxy document, which is controlled by management.
In an attempt to win Republican support, Democratic
senators are trying to limit which shareholders can nominate a
director for the corporate board.
The Securities and Exchange Commission has already proposed
setting the threshold at a sliding scale between 1 percent and
5 percent, with the lowest threshold for larger companies.
Shareholders would have to own stakes for at least a year.
Lawmakers from the House and Senate must broadly agree on
provisions to be included in the final financial regulation
bill. They have already resolved some contentious issues such
as new rules for credit rating agencies, but must hash out a
slew of other rules for the financial system.
Corporate governance issues were not expected to divide
House and Senate Democrats. But Frank and his fellow Democrats
appear unlikely to accept the Senate's language.
"Five percent is a lot to have to own in a company," Frank
told reporters after Democratic senators proposed the threshold
on Wednesday. "The Senate proposes to restrict the SEC
The Council of Institutional Investors, which represents
public, union and corporate pension funds with more than $3
trillion in assets, is urging House lawmakers to defeat the
"A 5 percent ownership requirement would effectively shut
out those large, long-term, responsible investors -- largely
public and union pension funds -- most willing to engage
companies and hold them accountable," the group said in a
letter to House negotiators.
Although shareholders can nominate directors, they can only
do so by waging a proxy fight, which many contend is costly and
burdensome. Business groups such as the U.S. Chamber of
Commerce oppose proxy access, fearing that special interest
groups that lack business acumen or long-term vision for
running a company could take over the boards.
(Editing by Leslie Adler)