Economics: S.E.C. Sued over Board Nomination Rule for Investors

A lawsuit to prevent the company's owners (shareholders) from influencing the company ...

The United States Chamber of Commerce and the Business Roundtable on Wednesday sued the Securities and Exchange Commission to overturn a rule that makes it easier for investors to oust corporate directors, arguing the provision gave activist investors too much leverage, Bloomberg News reported.

The rule, which allows shareholders who own 3 percent of a company to nominate board members to corporate ballots, was narrowly approved by the S.E.C. in August.

This special- interest-driven rule will give small groups of special-interest activist investors significant leverage over a business's activities, said David Hirschmann, president of the chamber's Center for Capital Markets Competitiveness.

The chamber, a business lobby, has said that if given more power to nominate directors, labor unions and public pension funds would hijack companies and push political agendas. But Mary L. Schapiro, the S.E.C. chairman, has said that the 2008 crisis, which cost financial firms more than $1.82 trillion, shows that shareholders need more say on board members.

From S.E.C. Sued over Board Nomination Rule for Investors by Andrew Ross Sorkin, September 30, 2010 at DealBook.