It’s official: Proxy access is the darling of the 2015 season. Shareholder-sponsored proxy access proposals are on the ballots of more than 100 U.S. public companies this spring.1 These precatory proposals seek a shareholder vote on a binding bylaw that would enable shareholders who meet certain ownership requirements to nominate board candidates and have them included in the company’s own proxy materials. Powerful institutional investors have given the proxy access movement enormous momentum this spring,2 and blue chip firms such as GE,3 Bank of America,4 and Prudential5 have voluntarily adopted versions of proxy access in advance of their annual meetings. Companies such as Citigroup6 have agreed to support proxy access shareholder proposals in their definitive proxy materials. In the absence of regulatory guidance, proxy advisors such as ISS have stepped into the breach to define the terms and conditions of proxy access.7 As proxy access proposals proliferate—after years of controversy8—the primary debate now seems to be whether a 3 percent or 5 percent ownership threshold is more appropriate.9
All this is not to say that proxy access is a fait accompli, and its current popularity among shareholders certainly does not mean that it is the right choice for American corporations.10 It is very much an open question whether proxy access will become an established part of U.S. corporate governance. Interestingly, despite all the ballot-box excitement, there has been little discussion of what shareholders could expect if proxy access were to become widely adopted and—as is the stated goal—directors proposed by a shareholder were then elected.11 In fact, it is likely that “proxy access directors” would find themselves in an unenviable position, facing conflicts and conundrums that many proponents of proxy access do not appear to have fully considered.
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