For equity issuers, many o the most signicant changes in the Dodd-Frank Act occur in thearea o corporate governance. SEC Chairman Mary L. Schapiro said in remarks at StanordUniversity Law School, “…the Commission’s job is to ensure that our rules supporteective communication and accountability among the triad o governance participants:shareholders, as the owners o the company; directors, whom the owners elect to overseemanagement; and executives, who manage the company day to day.”Here are just some o the provisions o the Dodd-Frank Act aecting equity issuers:
Increased Proxy Access
Te Act grants the SEC the authority to require issuers to include in the proxy ballotshareholders’ nominees to the board o directors. Te SEC acted quickly on proxy access, anissue they have been considering since 2003.On August 25th, the Commission voted 3-2 to allow shareholders to use the issuer’s proxy solicitation materials or this purpose. Tis rule change will be eective or meetings on orabout March 1, 2011.
Prohibition on Broker Voting
National securities exchanges are required to prohibit broker discretionary voting onthe election o directors, executive compensation, and other signicant matters to bedetermined by the SEC. Te NYSE already precludes broker discretionary voting onelection o directors, but this provision extends the restriction to other exchanges andproxy matters.Te eect o these provisions will be to make it easier or shareowners to nominatedirector candidates, and companies will no longer be able to rely on the broker vote topass management’s proposals. Tis makes it essential that issuers learn as much as possibleabout their shareowners’ voting records – and particularly any tendency toward activism by institutional investors.Proxy solicitors and advisory rms can assist the board and management in this regard by providing a voting history or key shareowners. Such rms also have analytical tools thatenable them to predict how certain categories o shareowners may vote on various proxy proposals. Additionally, the ability o equity issuers to communicate eectively with theirowners in contested situations will be critical, requiring a close working partnership withthe rm responsible or the design and delivery o proxy materials that can help investors tomake inormed decisions.
“…the Commission’s job is toensure that our rules supporteffective communicationand accountability amongthe triad of governanceparticipants: shareholders, asthe owners of the company;directors, whom the ownerselect to oversee management;and executives, who managethe company day to day.”
— Mary L. SchapiroSEC Chairman