Just a Small Leak

Dennis McCarthy – (213) 222-8260 – dennis@monarchbayassociates.com

In my post entitled, “Potential Trojan Horse?”, I described a battle being waged by a small band of M&A specialists over the “advance notice bylaw and proxy access rules”.

These corporate provisions specify how shareholders can influence their corporations on selecting board members and determining many critical M&A, corporate governance and management compensation decisions.

Proxy access rules may not have a catchy name like “poison pill”, but believe me, they’re important.

Here’s some background. In a battle waged last summer, the SEC’s proposed proxy access rules for shareholder participation were stopped in court.

What was left in place, maybe because its threat was underestimated, was the ability of shareholders to submit their own proxy access rules to a vote of shareholders.

I suggested that leaving in place this provision for shareholders to submit their own proxy access rule proposal was something of a Trojan horse that might surprise corporate boards with their vulnerability. 

So it caught my eye when I read that shareholders of Nabors Industries, a $6 billion New York Stock Exchange company, had approved a proxy access proposal on June 5th, the first instance of shareholders approving proxy access rules, to my knowledge.

The proposal was submitted by several large New York City pension funds and supported by pension funds from other states.

Interestingly, the proposal approved by Nabors’ shareholders contained several of the same elements that were in the SEC’s proposed proxy access rule struck down by the court last summer.

Now, the Nabors’ proposal was non-binding on the Nabors’ Board but it signals to me increasing shareholder activism and shareholders’ determination to have a voice in corporate decision-making.

What do you think?  Will this be an isolated case or does it signal a trend?

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