As negotiations on the massive financial reform bill continue this afternoon, what, if anything, the legislation will say about proxy access is still very much up in the air.

The issue is one of few remaining items left for conferees to hammer out as they try to wrap up their work today, in an effort to get a final bill passed and on the president's desk before the July 4 holiday, when Congress breaks for a 10-day recess. Both chambers would still have to approve a final bill before it can be sent for signature. If conferees finish negotiations today, as expected, House members could vote on a final bill as soon as Tuesday.

The bills previously passed by both chambers affirmed the Securities and Exchange Commission's authority to promulgate a proxy access rule. The SEC proposed rulemaking last year that would grant access to the proxy to shareholders that hold a stake between 1 and 3 percent for at least a year, depending on the size of the company. However, the Commission has delayed voting on the proposal, presumably awaiting Congressional action, which would thwart a legal challenge to its rulemaking authority by access opponents.

Some conference committee members have been pushing to strike any reference to proxy access from the bill. As a compromise, Senate Banking Committee chairman Chris Dodd (D-Conn.) this week offered an amendment that would provide access for shareholders that hold at least a 5 percent stake for two years, which access supporters argue would render access unworkable, even for the largest shareholders.

Today, House Financial Services committee chairman Barney Frank (D-Mass.) made a counter-offer that wouldn't specify an ownership stake or holding period, but would instead instruct the SEC to issue rules permitting the use of proxy materials for shareholders with "a long-term interest in the prosperity of the issuer," taking into consideration the number of shares and length of time held. Other issues the SEC would be instructed to consider in its rulemaking would be whether the holding or ownership requirements ought to be tiered based on the size of the issuer, and whether to require shareholders to hold their shares for a period after being elected.

Making the offer, Frank said House lawmakers "do not believe it is wise for us to specify numbers and percentages." The Senate must still accept or counter the measure.

Meanwhile, conferees agreed to drop a provision from the bill that would've required all public companies to adopt a majority voting standard in uncontested director elections. The measure was in the Senate bill, but not the House version.

However, an SEC Investor Advisory Committee may a recommendation to the Commission on the issue.

"If majority vote is in fact omitted from the final bill...I would expect that it will be Issue One before the IAC subcommittee," Stephen Davis, chair of the IAC subcommittee looking at the issue (and a Compliance Week columnist) told CW early Friday.

Davis said options the committee would consider would range from urging a stock exchange listing requirement to recommending an SEC disclosure rule on voting policies-such as mandating that a company explain why it is in the best interests of shareowners if it doesn't use a majority standard in board elections. The IAC will hold its next public meeting on Sept. 28 in Chicago.

Compliance Week will provide readers an update on the financial reform bill in the June 29 edition.

Topics