Shareholders Will Flex Some Muscle in Proxy Season

The SEC is giving investors a lot more power, and they’re sure to use it.

Next spring’s annual crop of shareholder meetings may hold some surprises. That’s when new Securities and Exchange Commission rules giving investors more muscle will be put to the test. It will then be easier for major investors such as pension firms and hedge funds to get rid of directors who are too cozy with company executives.

Some steps have already been approved, and more are coming. In July, the SEC OK’d a measure that prohibits brokers from casting votes on behalf of investors who don’t vote themselves in elections for directors. The ban ends a huge advantage for director candidates backed by management. “Brokers vote almost 100% of the time with management,” says Patrick McGurn, executive vice president at RiskMetrics Group. “So investors started clamoring” to end broker votes.

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Associate Editor, The Kiplinger Letter