Federal Proxy Rules
- Laws require that shareholders be able to influence corporations.modern corporative buildings image by Stasys Eidiejus from Fotolia.com
Many shareholders put a lot of money into corporations. The federal government believes these shareholders should have more control over how their company is run, so proxy access laws have been proposed to give shareholders more control over who runs the corporation on the board of directors. This added control might increase oversight, making corporations more accountable. - Proxy access is the process in which shareholders get a say in corporate board elections. Shareholders can place their nominees for the director of the company on proxy cards, according to the Council of Institutional Investors. The United States government is considering adopting proxy access laws in the United States.
- In some companies, shareholders who have more than 3 percent of the shares of the company and have owned these shares for more than two years are able to choose less than the majority of directors on the board, according to the Council of Institutional Investors. Up to 25 percent are able to be nominated.
- Smaller companies are allowed to have a deferral on the proxy access rule for three years and then must allow proxy access, according to the Council of Institutional Investors..
- At one point, the proxy access laws in the United States were going to allow any shareholder to nominate someone as the director of the board. However, this proposed legislation was opposed and was eventually scrapped.
- In some cases, the director nominees placed on the proxy access cards are advisory, meaning the corporation can simply take the nominees on the proxy access cards as suggestions. In other cases, the nominees must be put on the ballot.
- Many of the federal and state laws must work seamlessly together, according to the Securities and Exchange Commission. While the federal government is interested in preserving corporate rights, the ways in which the corporation's rights are defended is partially based on the laws regulating the corporation in a particular state.
- Shareholders are allowed to have a meeting with each other before voting or nominating other shareholders. This shareholder meeting allows shareholders to discuss the various board members that could possibly be nominated, according to the Securities and Exchange Commission. These meetings can be beneficial because many shareholders might not be informed about the qualities of the different board members.
- Among proxy materials are management proposals for actions the corporation could carry out, according to the Securities and Exchange Commission. Shareholders are allowed to have their own proposals kept with the managers' proposals.
