SEC Proposes Override Plan for Stockholders

The Securities and Exchange Commission on Thursday proposed a rule change that would let shareholders override management in deciding which resolutions are put to a stockholder vote.

The SEC included the override plan in a package of proposed changes to rules that determine which shareholder resolutions must be included by firms in their annual proxy statements. The agency is now seeking public comment on the ideas.

The package would allow investors to seek votes on a broader range of issues. But it would also make it easier for firms to exclude past proposals that didn’t get much support. Separately, the SEC would reverse a 1992 ruling, the effect of which could be to limit investors’ ability to force votes on social issues.

At present, investors who hold $1,000 worth of a company’s stock or 1% of its shares can submit a proposal for inclusion in that company’s annual proxy statement. Such proposals can recommend--not require--that the company take certain steps.

The law now provides 13 reasons for firms to legally exclude such proposals from proxies. However, the companies must obtain SEC clearance to use the exclusions.

Under the new plan, shareholders who wish to override the exclusion of their proposal would have to obtain letters of support from fellow investors who together own at least 3% of the stock.

However, the clause could be used to override only proposals that were omitted under the two most controversial exclusions. These allow a company to exclude proposals if they relate to its ordinary business or if they don’t involve a significant economic portion of its operations.