SEC debates shareholder rights plans

WASHINGTON — Securities regulators on Wednesday debated two competing shareholder rights proposals, one of which could pave the way for competitive elections for board seats at U.S. public companies.

It is one of the more contentious issues to come before the Securities and Exchange Commission during the two-year tenure of Chairman Christopher Cox, and formal adoption of either proposal likely is several months away.

Cox and the other four SEC commissioners voted at a public meeting to open the two proposals to public comment for 60 days.

One proposal would allow shareholders who together own at least 5 percent of a company’s stock to propose changes to the company’s bylaws on elections for directors.

The changes in bylaws could then be approved by a majority of all shareholders. That would give shareholder blocs the ability to get their candidates for board seats on the ballots distributed annually by companies — a significant change from the current system in which dissident investors must wage costly proxy fights and appeal to shareholders themselves.

The other proposal is closer to the status quo, allowing companies to keep off their proxies shareholder proposals related to the election of board members.

Reflecting the division among the SEC commissioners, Cox voted in favor of both proposals while expressing a preference for the first, more expansive, one; his fellow Republicans, Paul Atkins and Kathleen Casey, voted for the second one while Democrats Annette Nazareth and Roel Campos voted for the first.

The 5 percent minimum level of stock ownership set by the first proposal has stirred opposition from shareholder activist groups, which say it is too high.