Sutherland Alert: Proxy Plumbing: SEC Considers Extensive Renovation Job to the Proxy System

On July 14, 2010, the Securities and Exchange Commission (SEC) voted unanimously to issue a concept release seeking public comments on a variety of facets of the U.S. proxy system. Termed "proxy plumbing" because of the extensive nature of its review, the concept release covers the accuracy, reliability, transparency, accountability, and integrity of the proxy system. This current effort to modernize the proxy system marks the SEC's most comprehensive review of the proxy system in 30 years and is primarily in response to growing shareholder concerns about the accuracy of voting results. Given the recent increase in shareholder activism and the fact that more than 600 billion shares are voted at approximately 13,000 annual meetings in the U.S. each year, the accuracy of voting results has become an increasingly significant matter.

The SEC already has a full plate. The recently passed Dodd-Frank Act requires the SEC to implement up to 95 separate rules and grants the SEC authority to make rules providing investors with greater access to include nominees on issuers' proxy materials.2 Accordingly, proxy rules in response to the issues set forth in the concept release likely will not come to a final vote until next year, with implementation expected for the 2012 proxy season. All interested parties have until October 12, 2010 to submit comments on the concept release.

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