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US Court of Appeals Rejects SEC Rule on Board Nominees


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The US Court of Appeals has rejected the SEC's New Exchange Act Rule 14a-11, which would have allowed shareholders with greater than 3% ownership to nominate board members on the company's own proxy documents.  




I agree with the courts that it could make fighting proxies expensive for companies...we spent $50K in our group running the proxy against ITEX, while they spent a couple hundred thousand!  I think the 3% ownership rule is low.  They should probably raise it to 10% or higher.  


If incumbent management with limited ownership, feel they have an innate right not to listen to their largest shareholders, and feel they want to wage expensive proxy defenses against their own shareholders, then a majority of the remaining shareholders would probably come to their senses and vote against the incumbent management if they were spending excessive amounts on defense, rather than compromise.  


Hopefully the SEC will be able to move this forward with a higher threshold or something.  Cheers!  

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