One of the things the financial reform package passed earlier this year did is make it easier for company shareholders to make nominations to the board of directors. It's all part of the effort to make boards and companies more accountable and transparent about how they do business.
Last week I had the chance to speak with Thompson & Knight partner Amy Curtis about the new proxy access rule. She explained that the new rule allows certain shareholders and groups of shareholders to include their nominees for director in the company's proxy statement. Prior to this new rule, they had to launch their own proxy contest and then, also on their own, print and mail the required information about their nominees to stockholders. This way, shareholder nominations are less expensive and require less time.
That doesn't mean, though, that boards should expect an "onslaught" of shareholder nominations because the rule doesn't apply to just anyone. Only those shareholders who have owned at least 3 percent of the company's voting stock for three years or more can take advantage of the rule. What's more, as is true with any change, not everyone is jumping on the bandwagon at once. Curtis said:
I think many are going to wait and see how it plays out for those who are the first to jump in.
Boards should take advantage of the wait time-if they're fortunate enough to get it-and pay attention to their shareholders. Note how many shareholders or shareholder groups there are that would qualify to make use of the rule. Talk to them. See what their concerns are and how they want to address those concerns.
Make sure they understand who the company's current directors are and why those directors are well-suited to carry out the company's vision. And on a technical note, review company by-laws and other governance documents to make sure they don't need tweaking, given the new rule.
Though Curtis acknowledges change is always a challenge, she said she doesn't think this particular change will have that much of an impact just yet.