Proxy Access: Shareholder democracy or creeping mercantilism?
Following certain rule changes made by Congress and the U.S. Securities and Exchange Commission, the 2015 proxy season has seen a deluge of shareholder proposals at U.S. public companies calling for proxy access – the ability of minority shareholders to have their slate of directors included in the materials presented to shareholders ahead of a company’s annual meeting. Promoted as a means to enhance “shareholder democracy,” the legal and economic literature on proxy access does not support claims it maximizes shareholder wealth. Moreover, the process may allow unions and certain elected officials to use the corporate boardroom to effect politically motivated outcomes. This paper’s analysis of 65 proxy ballots completed through June 2015 suggests shareholders of firms that passed access initiatives lost $14.6 billion of wealth. The paper concludes with recommendations to grant more leeway to companies that omit or disqualify some kinds of proxy access proposals, as well as changes to rein in the power of elected officials who serve as administrators of public pension plans.