Paper Offers Defenses Against Proxy Access Challenges

Assistant Professor J.W. Verret of George Mason University’s School of Law has issued a research paper that suggests a number of unique strategies that boards can use to defend against proxy access challenges. The paper is called “Defending Against Shareholder Proxy Access: Delaware’s Future Reviewing Company Defenses in the Era of Dodd-Frank.”

It was just this August that a divided US Securities and Exchange Commission approved rule changes that put in place an access regime that lets shareholders include their director nominees in proxy materials as long as they meet eligibility requirements. In his paper, Verret notes that even with the new regime, Delaware law still allows for the “limiting or expanding of the reach of proxy access.” He says that corporate boards that want to defend themselves against such challenges should refer to corporate governance arrangements with a “secondary effect on the shareholder franchise and the shareholder nomination process” as seen by the “SEC’s proxy access rule.”

Verret has said that the federal mandate for proxy access will negatively affect retail shareholders in the long run. His defense tactic recommendations include:

• Defenses related to board characteristics
• Defenses that up insurgents’ costs
• Structured shareholder-voting related defenses

Verret’s paper argues that rule amendments by the SEC likely cannot preempt all state laws, which the boards can then use. He believes that federal pre-emption is not a high risk to the defenses that he is suggesting.

Related Web Resources:
Verret Paper Discussed in BNA Securities Law Daily, GMU.Edu

Paper Suggests Innovative Board Strategies To Defend Against Proxy Access Challenges, BNA, September 15, 2010

Defending Against Shareholder Proxy Access: Delaware’s Future Reviewing Company Defenses in the Era of Dodd-Frank, Social Science Research Network

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