Federal appeals court throws out SEC proxy access rule

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Federal appeals court throws out SEC proxy access rule

July 22, 2011 12:13:59 pm

[JURIST] The US Court of Appeals for the District of Columbia Circuit [official website] on Friday overturned [opinion, PDF] the Securities and Exchange Commission (SEC) [official website] “proxy access” rule. The rule allowed certain shareholders to have their board nominees listed on company-mailed proxy ballots that also list the management’s preferred candidates. Otherwise, the shareholders would incur the costs of mailing out separate ballots. The petitioners, the US Chamber of Commerce (COC) and the Business Roundtable [official websites], argued that the SEC failed “adequately to consider the rule’s effect upon efficiency, competition, and capital formation” in violation of the Administrative Procedure Act [5 USC § 551 text]. The three-judge panel agreed, calling the rule “arbitrary, capricious, [and] an abuse of discretion.” President and CEO of the COC Thomas Donohue welcomed the court’s decision:

This is a big win for America’s job creators and investors. 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.

The SEC has failed in this same court to enforce similar laws on three other occasions, though it will now have the opportunity to reevaluate and potentially reissue the rule.

Some investor groups, including labor unions and pension funds, espouse proxy access rules, arguing that such rules ensure that company management is held accountable [WSJ report]. Companies, however, contend that proxy access rules give too much power to minority or special interest groups. The SEC was authorized to implement proxy access rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act [text, PDF], which was signed into law [JURIST report] by President Barack Obama in July 2010 and created the new regulatory council to monitor financial institutions in order to prevent companies from becoming “too big to fail.” In addition to creating the US Financial Stability Oversight Council (FSOC) [offical website], this legislation also gives the Federal Reserve [official website] new oversight over the largest financial institutions, creates a bureau of consumer protection, introduces multitudes of new regulations on derivatives and other financial instruments and limits the amount of capital banks can invest in hedge funds. In June 2009, the administration proposed a broad series of regulatory reforms [press release; JURIST report] aimed at restoring confidence in the US financial system in the wake of economic crisis [JURIST news archive].

Martin Luther King Jr. wrote his Letter from Birmingham Jail

On April 16, 1963, an incarcerated Martin Luther King, Jr. (arrested for demonstrating in defiance of a court order) wrote his Letter from Birmingham Jail in response to a published statement by eight fellow clergymen from Alabama.

Part of the letter read: We have waited for more than 340 years for our constitutional and God-given rights. The nations of Asia and Africa are moving with jetlike speed toward gaining political independence, but we stiff creep at horse-and-buggy pace toward gaining a cup of coffee at a lunch counter. Perhaps it is easy for those who have never felt the stinging dark of segregation to say, "Wait." But when you have seen vicious mobs lynch your mothers and fathers at will and drown your sisters and brothers at whim; when you have seen hate-filled policemen curse, kick and even kill your black brothers and sisters; when you see the vast majority of your twenty million Negro brothers smothering in an airtight cage of poverty in the midst of an affluent society; when you suddenly find your tongue twisted and your speech stammering as you seek to explain to your six-year-old daughter why she can't go to the public amusement park that has just been advertised on television, and see tears welling up in her eyes when she is told that Funtown is closed to colored children, and see ominous clouds of inferiority beginning to form in her little mental sky, and see her beginning to distort her personality by developing an unconscious bitterness toward white people; when you have to concoct an answer for a five-year-old son who is asking: "Daddy, why do white people treat colored people so mean?"; when you take a cross-county drive and find it necessary to sleep night after night in the uncomfortable corners of your automobile because no motel will accept you; when you are humiliated day in and day out by nagging signs reading "white" and "colored"; when your first name becomes "nigger," your middle name becomes "boy" (however old you are) and your last name becomes "John," and your wife and mother are never given the respected title "Mrs."; when you are harried by day and haunted by night by the fact that you are a Negro, living constantly at tiptoe stance, never quite knowing what to expect next, and are plagued with inner fears and outer resentments; when you are forever fighting a degenerating sense of "nobodiness" then you will understand why we find it difficult to wait. There comes a time when the cup of endurance runs over, and men are no longer willing to be plunged into the abyss of despair. I hope, sirs, you can understand our legitimate and unavoidable impatience. Read the full text of the Letter.