By Rachelle Younglai
WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission proposed on Wednesday to give shareholders greater power to nominate corporate board directors, a process now tightly controlled by company management.
Amid a push by investor groups for greater accountability by corporate America, the SEC voted 3-2 to propose two approaches aimed at giving shareholders an easier way to influence the composition of the board -- an issue also known as proxy access.
One approach would let shareholders who own 1 percent to 5 percent of a company's stock for at least one year nominate directors.
This approach would be linked to the company's size, with shareholders required to hold at least 1 percent in a large company, 3 percent in a midsize company and at least 5 percent in a small company.
The other approach would amend a federal rule that sets guidelines for whether a company's management can exclude shareholder proposals from the proxy. The SEC would let shareholders put forth proposals to amend bylaws that could allow them to nominate directors.
The latter approach would effectively overturn a 2007 SEC decision that allows companies to exclude shareholder proposals for director nominations from corporate ballots.
The five-member agency would most likely decide later this year whether to finalize one or both approaches.
The business community has resisted giving shareholders greater proxy access, arguing it could give special interest groups too much power to the detriment of other investors.
"This is a step in the wrong direction" said the U.S. Chamber of Commerce, the country's largest business lobby, adding it would vigorously oppose the SEC proposals.
The SEC has long wrestled with the issue of proxy access, considering several changes over the past six years.
Shareholders can currently nominate their own slate of directors, but they can only do so through proxy fights, which many shareholder activists consider expensive and burdensome.
Demands to give shareholders, the owners of companies, more power to shake up boardrooms have only increased now the government has had to use billions of dollars in taxpayer funds to prop up companies like Bank of America
On Tuesday, senior Democratic Senator Charles Schumer introduced legislation that would give shareholders more say on executive pay packages. His bill also is aimed at giving shareholders and pension fund investors a voice in the corporate board room.
Under the SEC proposal linked to company size, shareholders would only be allowed to nominate up to a quarter of the company's board of directors.
Shareholders would also be required to sign a statement declaring their intent to continue to own their shares through the date of the annual meeting. They would also be required to certify that they are not pushing for the company to sell itself or seeking to gain more than minority representation on the board of directors.
(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)
