Court of Appeals Throws Out SEC's Proxy Access Rule

Jul 22, 2011

Today, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit gave job creators and investors a big win by tossing out a Securities and Exchange Commission (SEC) rule that would have enabled special interest groups to interfere in corporate board elections.

On Business Roundtable and Chamber of Commerce v. SEC, Mike Scarcella at The BLT reports:

The appeals court sided with the business groups’ lawyers, who argued that investors with special interests, including unions and state and local governments, would be likely to put the maximization of shareholder value second to other interests.

“By ducking serious evaluation of the costs that could be imposed upon companies from use of the rule by shareholders representing special interests, particularly union and government pension funds, we think the Commission acted arbitrarily,” Judge Douglas Ginsburg said in the ruling, joined by Chief Judge David Sentelle and Judge Janice Rogers Brown.

The SEC, the appeals court said, “inconsistently and opportunistically framed the costs and benefits of the rule” and also failed “to respond to substantial problems raised by commenters.”

The Chamber's president and CEO Tom Donohue was pleased with the ruling:

We applaud the court’s decision to prevent special interest politics from being injected into the boardroom.  Companies and directors need to continue to focus on the important work of creating jobs and reviving our economy. Today’s decision also sends a strong message that regulators need to meet their statutory requirement to clearly prove that the benefits of regulation outweigh the costs.

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