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Proxy access — denied

By Sheyna Steiner ·
Tuesday, July 26, 2011
Posted: 12 pm ET

It's been a tough year for the Dodd-Frank Act. Not only is the House of Representatives working to undo investor protections, the judiciary is as well.

On Friday, July 2, an appeals court threw out the proxy access rule set by the Securities and Exchange Commission as empowered by the Dodd-Frank Act, the Los Angeles Times reported on Saturday in "SEC's proxy access rule tossed out by court."

The U.S. Chamber of Commerce and the Business Roundtable filed suit last year, arguing that the contested shareholder elections would distract company management and would benefit labor unions. Such challenges to rules of government agencies go directly to the appeals court.

The judges, all Republican appointees, agreed with the business groups. They ruled that the SEC acted "arbitrarily and capriciously" in not properly evaluating the effect on companies. Among the potential consequences of the rule were increased costs companies would face fighting shareholder nominees.

The court decision leaves the door open for the SEC to do more analysis and enact a revised rule. SEC spokesman Kevin Callahan said the agency was reviewing the decision and considering its options.

The SEC rule would have allowed shareholders to nominate candidates for their company's board of directors. Not just any shareholders but those owning 3 percent of the company's voting stock for 3 years.

For shareholders to put a watchdog on the board of directors would serve their best interest. Keeping shareholders and "special interests" out of the boardroom keeps the preferred structure intact.

In a post titled, "Appeals court strikes down SEC proxy access rule," a blog, Legaltimes, noted on Friday that shareholders will still be able to submit proposals for proxy access at their companies.

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