Proxy access proposals adopted this season in the US are often ‘toothless’ or ‘make access difficult,’ and companies that adopt them should lower ownership thresholds and ditch shareholder aggregation limits, the Council for Institutional Investors (CII) says.
In a five-page ‘best practices’ paper outlining the proxy access it wants for shareholders, CII says it supports an ownership threshold of 3 percent, instead of the more common 5 percent. It also wants no limit on the number of shareholders that can aggregate their holdings for proxy access, while many proposals limit the number to a maximum of 20.
CII says the 5 percent ownership threshold is so high that, even if the 10 largest pension funds in the US aggregated their holdings of a single company’s shares, they would not meet the threshold. The best practices document says the limit ensures proxy access is not ‘consistently and realistically viable’.
The group presents a similar argument against imposing limits on the number of shareholders that can aggregate their holdings for proxy access, saying even the 20 largest public pension funds would not meet the 3 percent threshold at most companies, requiring aggregations of larger groups of shareholders.
It also says loaned securities should count toward the ownership threshold, opposing any requirement that a nominator pledge to continue holding its shares after the annual meeting.
‘CII urges companies that decide to adopt access mechanisms to talk to their shareowners about the approach they prefer and to avoid requirements that make access difficult to use or toothless,’ CII says. While dozens of companies have adopted access bylaws or charter amendments, ‘some of those companies have included – or are considering including – in proxy access mechanisms, provisions that could significantly impair shareowners’ ability to use proxy access, or even render access unworkable.’
