From the desk of Stephen Cabot: The Security and Exchange Commission (SEC) has done an enormous political favor for the country’s unions. In a 3 to 2 decision, the SEC has passed a rule known as “access to the proxy.” This rule gives special rights to the friends of unions and state pension plans to nominate their chosen candidates for corporate boards and offer injurious proxy measures.
The SEC’s ability to pass such a rule was granted to it by the recently passed Dodd-Frank Act.
Prior to “access to the proxy,” all shareholders holding a single class of securities had identical rights. Under the new rule, however, the SEC has increased the power of special interest groups, giving them rights that few others possess. Institutions holding 3% of a company’s stock for three years will now have special powers granted to them by the new rule.
Unions and state pension funds now have leverage to get what they want from corporate boards. All they need do is nominate an individual to a board who would be anathema to its officers and/or propose a proxy measure that would hurt earnings. They could then refuse to withdraw their proposals until their real demands are met. Talk about leverage!
“Access to proxy” is another example of a Democratic congress and a Democratic administration paying off their union supporters. “Access to proxy”, though touted as an investor friendly act, is really a wolf in sheep’s clothing, and that wolf is a voraciously predatory animal.