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Second U.S. Company to Consider Adopting Proxy Access

Reese Darragh | January 27, 2012

Payment services company Western Union announced that it plans to offer a management bylaw proposal at its next annual meeting to allow investor groups who hold a 5 percent stake or more for a period of three years to nominate a candidate to the board. The proposal will appear in the management's upcoming proxy statement, it said in a no-action request letter submitted to the Securities and Exchange Commission dated Jan. 13.

The company is also seeking the SEC's permission to exclude a binding resolution filed by one of its more prominent shareholders, Norges Bank Investment Management—the investment arm of the Norwegian Central Bank that manages the country's pension fund on behalf of the Ministry of Finance. The resolution submitted by the Norwegian monetary authority seeks to lower the threshold of shareholders' eligibility to nominate a board's candidate to a one percent stake for one year.

Western Union argues that the resolution should be excluded as it would conflict with the planned management proposal. As noted by Ted Allen in his ISS governance blog, there has been no response from the SEC's staff over the duo's competing access proposals but generally they have allowed companies to exclude shareholder special meetings that called for a 10 percent stake by offering management proposals with higher ownership, between 25- and 40-percent thresholds.

On Jan. 5, mechanical service firm KSW Inc. became the first company in the United States to adopt the by-law amendment to allow its shareholders who owned five percent or more stakes at the company for at least one year to make a director nomination in the annual meeting. The change was adopted in response to a shareholder proposal from Chicago-based Furlong Fund that has requested the nomination eligibility of a two percent stake for one year. KSW is seeking to omit Furlong's proposal and insists that it has substantially implemented the resolution.

Under the shareholder proposal rule, companies have a say on whether to include any of the suggested proposals by shareholders or otherwise. If they choose to include shareholder proposals, they will have to place the proposals on their proxy cards and allow all shareholders to vote on those suggestions during the proxy season.

Should any company decide to reject any of the shareholder proposals, the company will have to submit in writing to the SEC why they refused to accept the proposal in question unless the proposals submitted by shareholders did not comply with the guidelines as outlined in the rule. In this case, companies can return the proposals to shareholders within 14 days of receiving the submission and allow shareholders 14 days to re-submit their proposals for consideration.