During negotiations today on the financial reform bill, the U.S. Senate's representatives voted 8 to 4 against Senator Charles Schumer's motion to remove limits on a proposed proxy access rule now before the SEC.

Yesterday, Senator Christopher Dodd, the lead Senate Democratic negotiator, proposed a 5 percent minimum ownership threshold and a two-year holding period for shareholders to be able to nominate board candidates. The bills passed by the House and Senate affirmed the authority of the SEC to issue a proxy access rule, but sought no limits on access and left  those details up to the commission. Legislative observers said the proposed limits on access were pushed by the White House.

In offering his motion today, Schumer, a New York Democrat, said Dodd's restrictions wouldn't work, noting, "they don't provide enough access for investors."

Two other Democrats, Senators Blanche Lincoln of Arkansas and Tim Johnson of South Dakota joined with Dodd and the five Senate Republicans on the conference committee in voting against Schumer’s request. The Republicans oppose having any access language in the bill.  

However, Dodd's proposed limits on proxy access won't become law if the House conferees oppose these restrictions. Rep. Barney Frank, the lead House negotiator, told reporters yesterday that 5 percent "is a lot to have to own in a company to be able to get involved."
 
Activist investors oppose the 5 percent requirement. In a letter to lawmakers, the Council of Institutional Investors warned: "A five percent ownership requirement, however, would effectively shut out those large, long-term institutional investors--largely public and union pension funds--most willing to engage companies and hold boards accountable."