BOSTON (Reuters) - U.S. securities regulators on Wednesday voted two to one to propose new rules that would allow investors to pick directors from a single ballot, the latest move to open up the governance process of large corporations.
If eventually approved by the U.S. Securities and Exchange Commission, the new rules would require shareholders to receive so-called “universal” proxy cards listing both management and dissident nominees to a company’s board.
The change would make it easier for shareholders to split their votes between candidates put forward by the two sides, an idea pushed by large investors. The idea has proven controversial, however, with business groups worried it would empower disruptive activists.
Speaking at an agency meeting in Washington, which was webcast, SEC chair Mary Jo White on Wednesday said the proposals would “strike the appropriate balance” between the rights of corporations and activists while improving the process overall. Some details would still have to be worked out, such as ballot formats.
The dissenting vote was cast by Republican SEC commissioner Michael Piwowar, who said the changes would increase the likelihood of proxy fights.
“The ultimate losers in these fights will be the public shareholders of these companies,” he said.
The SEC will now seek public comments on the proposals, for 60 days.
Just how much influence to give shareholders has been a hot topic since the financial crisis. The SEC has already made it easier for groups of small shareholders to run their own candidate for corporate boards, known as “proxy access.”
Investors who want to split their votes between different slates currently must attend company meetings in person, a time-consuming process.
Ken Bertsch, executive director of the Council of Institutional Investors, which backed the change and whose members include large pension funds and endowments, said the rules outlined on Wednesday amount to “a strong proposal that would create a much stronger practice” in contested elections.
The proposed new rules also would require proxy cards to include options for investors to vote “against” or “abstain” on certain directors. Those options could clarify shareholders’ voting rights, Bertsch said in a telephone interview.
Tom Quaadman, a leader of the U.S. Chamber of Commerce, a business lobbying group opposed to the universal proxies, said in an e-mailed statement the changes would “turn director elections into annual political-style campaigns” and give companies a reason to avoid public financial markets, hurting their competitiveness.
Reporting by Ross Kerber in Boston; Editing by Lisa Shumaker and Andrea Ricci