Power to the Shareholder
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The Securities and Exchange Commission voted Wednesday to give shareholders greater power to place directors on corporate boards, a move forward in the shareholder rights initiative that has sought to take power from the hands of executives at U.S. corporations.
The vote was split along party lines, and the agency's Republican commissioner denounced the new rule, calling it illegal. The major corporations in the U.S. are hoping that the rule gets struck down, as it may open the door for the advancement of special interest agendas.
The newly appointed powers to the shareholders mean that investors, including hedge funds, pension funds and unions, could have the potential to influence the financial and strategic decisions made by U.S. corporations.
To win the right to vote on board member according to the new rule, an investor or group of investors must own at least 3 percent of the company’s shares and have held the stock for at least three years.
The new rule is set to be in place before the 2011 annual meeting next spring.
The new powers have been pushed for by hedge funds, pension funds and labor unions for years, noting that corporate boards have not taken into account the interests of shareholders as they have not been faced with contested elections.
The two Republican commissioners that opposed SEC Chairman Mary Schapiro and her supporters see the rule creating a climate of competing interests within companies and a possible slowdown of corporate decision making.
"The policy objectives underlying the rule are unsupported by serious analytical rigor," said Republican SEC commissioner Kathleen Casey, notion that the rule could cause "significant harm to our economy."
The vote was split along party lines, and the agency's Republican commissioner denounced the new rule, calling it illegal. The major corporations in the U.S. are hoping that the rule gets struck down, as it may open the door for the advancement of special interest agendas.
The newly appointed powers to the shareholders mean that investors, including hedge funds, pension funds and unions, could have the potential to influence the financial and strategic decisions made by U.S. corporations.
To win the right to vote on board member according to the new rule, an investor or group of investors must own at least 3 percent of the company’s shares and have held the stock for at least three years.
The new rule is set to be in place before the 2011 annual meeting next spring.
The new powers have been pushed for by hedge funds, pension funds and labor unions for years, noting that corporate boards have not taken into account the interests of shareholders as they have not been faced with contested elections.
The two Republican commissioners that opposed SEC Chairman Mary Schapiro and her supporters see the rule creating a climate of competing interests within companies and a possible slowdown of corporate decision making.
"The policy objectives underlying the rule are unsupported by serious analytical rigor," said Republican SEC commissioner Kathleen Casey, notion that the rule could cause "significant harm to our economy."
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