Activist shareholders are looking to have a greater say about the composition of the boards of U.S. public companies. The ultimate goal of these shareholders is to reshape how public company directors are traditionally selected. This movement has been caused, in part, by widely publicized corporate governance and senior management failures. Such scandals, including the recent Wells Fargo fraud scheme, have prompted a higher level of scrutiny not only on the oversight role of directors, but also, more fundamentally, on how qualified directors are nominated. This movement has created what is becoming a new “norm” regarding shareholder proxy access that many public companies have adopted.
Over the past couple years, there has been an uptick in shareholders proposing amendments to company bylaws to facilitate the addition of, or changes to, proxy access rules. Proxy access gives long-term shareholders the right to place board nominees of the shareholders’ choosing on the company ballot during annual reporting and proxy season. The shareholders’ board nominees will then be voted on by all shareholders, alongside directors recommended by the board. The phenomenon of proxy access shareholder proposals is relatively new, and has been met with differing approaches by issuers.
