Seven elite US law firms have come together to lobby the Securities and Exchange Commission (SEC) on how the agency should implement a proposal to allow shareholders to nominate company directors.

Lawyers involved in drafting the letter acknowledge it was rare for one letter to come from all the firms, which included Cravath Swaine & Moore, Sullivan & Cromwell and Wachtell Lipton Rosen & Katz.

At least four of the firms also sent separate letters addressing concerns with the policy direction the SEC is taking.

The other firms to sign the joint letter were Davis Polk & Wardwell, Latham & Watkins, Skadden Arps Slate Meagher & Flom and Simpson Thacher & Bartlett.

At issue is a proposed rule before the SEC that would make it easier for shareholders to nominate and elect individual directors to corporate boards. Supporters of the change argue that shareholders do not have the ability to hold boards of directors accountable. The oversight, they say, allowed financial institutions and companies at the centre of the economic crisis to pile on excess risk.

The shareholder rights proposal would require public companies to include in their proxy materials shareholder nominees for directors that could comprise up to a quarter of the board.

The seven firms, who are known for the representing management and boards at corporations and financial institutions, are largely opposed to expanding shareholder rights.

But they largely address in their letter the functionality of the proposal, making suggestions on how the SEC should implement it if it is approved.

"If the SEC chooses to adopt [the proposed rule], we would urge the SEC to be cautious in implementing what all participants in this debate acknowledge will be one of the most significant rule changes in SEC history," the letter said.

The seven firms recommend the SEC amend an existing rule to allow shareholders to submit proposals for governance changes that would allow them to nominate directors. But they do not support the SEC's proposal to require shareholder access at all the affected companies.

Lawyers involved in developing the law firms' letter say it is not unheard of for the seven firms to submit a joint letter, though it is infrequent. They last submitted a joint letter in February 2006, which in its text described itself as "unusual," to address proposed changes to the so-called "best-price rule" for tender offers.

"We do know the [2006] letter was cited by the commission in its final release a number of times, so that is indicative that they listen to us," said Charles Nathan, co-chair of M&A at Latham & Watkins.

This article first appeared in New York Law Journal, a US sister title of Legal Week.