Picking a corporate board gets easier

New SEC rules make it easier for shareholders to nominate their own candidates for the board.

By Kim Peterson Aug 26, 2010 2:09PM
Boardroom © Getty ImagesIt's now easier for shareholders to get new people onto corporate boards -- but some companies say they want that to change.

The changes come from a close vote this week at the Securities and Exchange Commission. Now, when companies mail ballots before shareholder meetings, they must include the names of all board nominees on them, the Wall Street Journal reports.

In the past, shareholders who wanted a new candidate had to pay for mailing separate ballots. They also had to do their own campaigning. Those barriers were a huge roadblock to getting anyone elected that wasn't hand-picked by the existing board.

But not every shareholder can nominate someone, the Journal reported. The new rules say that only an investor (or group of investors) with at least 3% stock ownership -- and with at least three years' history owning the stock -- can nominate.

There's a predictable difference of opinion on this one. The chairman of the SEC says the new rules will give shareholders more power in running a company.

But others say the rules pave the way for inefficient boards. Some could come in with competing interests, for example, that will create problems.

The Journal says the new rules will make it easier to force changes at small companies. At behemoth Verizon Communications (VZ), for example, investors would have to own $2.4 billion in shares to hit that 3% level needed to nominate a new director.

But at a company like Leap Wireless (LEAP), the Journal reported, you would only need a $28 million stake.

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