SEC Lets Firms Block Vote on Proxy Access

The Securities and Exchange Commission allowed Halliburton Co., Verizon Communications Inc. and Qwest Communications International Inc. to prevent investors from voting on nominating their own candidates to corporate boards.

The move, announced in letters to the companies Monday, comes as proponents of a pending proxy-access plan accuse the SEC of abandoning efforts to give shareholders more clout in elections.

“The staff has taken a half step backwards at a time when the commission should be taking two steps forward,” SEC Commissioner Harvey J. Goldschmid, a Democrat who supports giving investors the ability to nominate board members, said in a statement. “Unfortunately, the worst instincts of the CEO community have continued to triumph.”

The proposal, submitted by the American Federation of State, County and Municipal Employees, and pension funds in Connecticut and New York, asked to let investors vote on nominating their own board candidates the following year. The funds attempted to draft the measure in accordance with a rule the SEC proposed in 2003.

The SEC proposal would allow institutional investors to nominate directors to corporate boards under certain conditions. The plan has stalled amid opposition from business groups, and the SEC appears divided on the issue.

SEC Chairman William H. Donaldson’s office denied that the chairman was backing away from his earlier support of proxy access and noted that the letters represent the SEC staff’s view.

“He believes that something needs to be done on the issue of shareholder access and continues to work towards an approach that addresses legitimate concerns on both sides of the issue,” said SEC spokesman Matt Well.

In the no-action letters, Alan Beller, director of the SEC’s corporation finance division, said the resolutions could be excluded from the proxies because the proposals relied on a SEC proposal that has languished.

The letters from the SEC staff are a setback to shareholder activists who had hoped to begin using the proxy access proposal this year. Gerald McEntee, president of AFSCME, said in a statement that the SEC commissioners should issue a final decision and settle the matter.

“It is disingenuous for the SEC to first establish an interim process to allow shareholders to offer advisory proxy access proposals and then take away that right because they have taken too long to make their own decision,” McEntee said.

The SEC staff has vacillated on whether to allow investors to submit resolutions in accordance with the access proposal. In December the SEC’s corporation finance division told Walt Disney Co. it could leave an access proposal off of its proxy, reversing its earlier recommendation to the company.