Proxy access was one of the most highly anticipated issues of the 2012 U.S. proxy season, and here at the halfway mark of the season, this issue has lived up to its billing.
To date, only three proxy access shareholder proposals have gone to a vote, but that's only part of the story.
We have seen a veritable hodgepodge of proposed access rights presented to shareholders: ownership thresholds of 1 percent for one year, 2 percent for one year, 1 percent or 100 shareholders owning $2,000 apiece for one year, and, perhaps most interesting, 15 percent for 1 month. To date, no proposal with a 3 percent/three year ownership threshold patterned after SEC Rule 14a-11 (which was struck down by a federal court) has come to a vote; the first will be at Nabors Industries' meeting on June 5.
In addition, we have seen proxy access proposals used as bargaining chips. Consider the settlements at Hewlett Packard, where a shareholder access proposal was withdrawn after the company agreed to sponsor a proposal in 2013, and at Pioneer Natural Resources, where Norges Bank Investment Management withdrew its proposal after the board adopted majority voting and sponsored a proposal to declassify the board.
Moreover, we have seen the SEC grant no-action relief to most of the companies where shareholders filed proposals fashioned on the U.S. Proxy Exchange’s (USPX) model.
This year's first vote on access was at Wells Fargo, where a Norges Bank proposal received almost 33 percent support. The Norges Bank proposals are binding and seek a threshold of 1 percent for one year.
At Ferro Corp., a USPX-style proposal received 13.5 percent support, which appears somewhat high considering many institutional investors' concerns with the USPX ownership threshold, which would permit holders of as little as $200,000 to nominate board candidates. It's possible that some investors considered the company's poor governance practices and history of ignoring majority shareholder votes and cast a symbolic vote for this non-binding proposal.
Third, a binding proposal received 21 percent support at KSW’s meeting this week, company officials said. This is an interesting case because it's the first case where we saw a shareholder proposal filed at a company that already had a proxy access right. KSW, a company with a $25 million market cap, adopted a proxy access right with a 5 percent for one year ownership requirement. The shareholder proponent, Furlong Financial, countered with a 2 percent for one year ownership requirement.
Things are still in the early stages though; shareholders will vote on proxy access proposals at Charles Schwab and Princeton National Bancorp on May 17 and at Western Union and CME Group on May 23.
Meanwhile, the SEC staff has denied Norges Bank’s request to reconsider a no-action ruling that allowed Staples Inc. to omit its access proposal. The company argued that the binding proposal would conflict with an existing company bylaw.
ISS Governance Exchange members can obtain more information on 2012 proxy access proposals by clicking here.