Home > Director Elections, Uncategorized > Proxy Access and Proportional Election systems

Proxy Access and Proportional Election systems

I will herein introduce a topic suggested by Prof. Bainbridge in its recent post “Does proxy access matter?”, (1).

 While the post refers to Proxy Access, which is currently a trendy topic in Corporate Governance discussions in the USA, we will deal with a side issue.

 Proxy access is a “mechanism that gives shareholders the right to nominate directors and have those nominees included in the company’s annual meeting proxy statement.”

 In 2010, in the Dodd-Frank Wall Street Reform and Consumer Protection Act (2) Congress authorized the SEC to issue a proxy access rule. In August 2010, the SEC approved a proxy access rule (3) but when a lawsuit challenging the rule succeeded, the SEC abandoned its proxy access rule. Nevertheless, shareowners may still file proposals so that general meetings approve proxy access provisions in a case by case basis. (4)

 2015 has seen a number of shareholder proposals asking for proxy access for shareholders having owned a certain percentage of the votes for a certain period of time, and eventually many of them were approved.

 But what calls my attention is Prof. Bainbridge´s reluctance to accept that proxy access could have positive effects, based on the fact that it would lead to confronted and dysfunctional boards. He states that the result would be similar to the case of cumulative voting systems.

 He argues that the resulting board would be a mirror of the majority-minority shareholder opposition. I would tend to reject his argument introducing not cumulative voting but (partially) proportional electing systems, (as existing in Spain, for instance). Although a dysfunctional board could emerge, where as he suggests, the majority directors could even meet and decide out of the board, directors really have fiduciary duties that force them to care about “all shareholders interests” or the “company`s interests”. And certainly giving voice to shareholders (once their investment is high enough, of course, as it is in proxy access and in proportional systems), should not be dismissed just because directors “could eventually not fulfill their fiduciary duties”.

  1. http://www.professorbainbridge.com/professorbainbridgecom/2016/01/does-proxy-access-matter.html
  2. See the law here: https://www.gpo.gov/fdsys/pkg/PLAW-111publ203/pdf/PLAW-111publ203.pdf
  3. Here: http://www.sec.gov/rules/final/2010/33-9136.pdf
  4. See comment by the Council of Institutional Investors here: http://www.cii.org/proxy_access

  1. January 16, 2016 at 11:38 pm

    “I will herein introduce” is right. Interesting concept, let’s hear more about proportional representation and how it works or would work in the corporate governance setting.


  1. January 17, 2016 at 1:36 pm

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