SEC Defers Divisive Shareholder Ruling

The Securities and Exchange Commission clouded the 2007 corporate proxy season with uncertainty by delaying action on a rule for handling shareholder proposals, investor activists said Thursday.

In a move sure to invite a barrage of lobbying, the SEC said it would wait until mid-December to clarify questions raised by a September federal appeals court decision that revived a long-standing debate about the power of shareholders in boardrooms.

The SEC was expected to respond to the court decision next week. But its five commissioners were unable to agree on what to do and pushed back a decision to Dec. 13.

Now, it’s unlikely that any SEC rule change would take full effect before proxy season is well underway, sowing confusion.

“The delay may inadvertently have caused a timing problem, with some companies that are going to be unclear on how to proceed,” said Thomas Lehner, director of public policy for the Business Roundtable, a lobbying group for CEOs.

SEC Commissioner Annette L. Nazareth defended the delay.

“We’ve decided not to do some quick fix next week.... We’re going to take some time to take a more organic approach,” she told reporters after a speech in Washington.

Shareholder activists welcomed the postponement.

“Given the sharp division of opinion on this, you can assume the SEC will be heavily lobbied on both sides of the issue in the next couple of months,” said Barbara Roper, investor advocate at the Consumer Federation of America.

The Council of Institutional Investors applauded the SEC’s move to let the court decision stand, calling it “great news for investors.”