Proposed Proxy Access Exemption for Small Issuers is backwards
- There is a good Corpgov.net blog post on the horse trading that recently took place regarding proxy access in the Dodd-Frank financial reform legislation at http://corpgov.net/wordpress/?p=2206 See also the Riskmetrics Blog at http://blog.riskmetrics.com/gov/2010/06/lawmakers-release-final-tex...
Corporate lobbyists urged, in addition, of course, to all kinds of hurdles and thresholds aimed at neutering access altogether, that the SEC exempt smaller firms. In the most recent version of the bill, lawmakers guided the SEC to provide such an exemption.
The idea of exempting small company boards from the increased accountability that proxy access might provide shareholders is frankly #ssbackwards. Shareholders of smaller companies, having already lost corporate governance protections from various other small company exemptions (e.g. certain Sarbanes Oxley provisions, etc) are most in need of proxy access to offset the more prevalent dysfunction found in small company boards governance.
One particular aspect of proposed exemptions from proxy access for smaller issuers is the definition often proposed for “small company” which measures “public float” [generally of less than $75MM.] Use of “public float” to measure an issuers size rather than straight market capitalization exacerbates the basic problem.
The more shares held by those “affiliated” with the issuer, the higher the overall market cap of the issuer that would gain the exemption and the more issuers that will be exempted from proxy access. Yet it should be quite obvious that the more shares held by affiliated parties, the greater likelihood of an insular, dysfunctional and completely unresponsive board.
Tags: access, corporate governance, governance, proxy, proxy access, small issuers
Views: 3
Replies to This Discussion
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Permalink Reply by Tracy Stewart on -
Absolutely! It's the same with SOX. We can't let smaller companies fly under the radar. They may need more monitoring from shareowners since they won't be in the public eye as much. Hopefully this will not make it into the final bill, or at least that the SEC won''t allow it.
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Permalink Reply by Andrew Shapiro (Lawndale) on -
I think small issuers recently got permanent exemption from some of SOX. If so, it makes it doubly important that proposed exemptions for small issuers from proxy access are not allowed.
Tracy Stewart said:Absolutely! It's the same with SOX. We can't let smaller companies fly under the radar. They may need more monitoring from shareowners since they won't be in the public eye as much. Hopefully this will not make it into the final bill, or at least that the SEC won''t allow it.
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