Council of Institutional Investors

Proxy Access

CII supports providing long-term shareowners access to the company's proxy to nominate director candidates consitituting less than a majority of the board.

"Proxy access" is shorthand for the ability of a long-term shareowner (or a group of long-term shareowners) to place a limited number of alternative board candidates on the company's proxy card (ballot) for the company's annual shareowner meeting. Proxy access also allows the nominating shareowner to provide a brief description of each alternative candidate in the proxy card's accompanying document, known as the proxy statement.

Proxy access generally is available only to shareowners who have collectively held at least 3 percent of outstanding shraes for at least three years. Even if proxy access is rarely invoked, its availabilty makes boards more vigilant in their oversight of management and more responsive to the interests of the company's owners. According to Sidley Austin, as of the end of 2018 at least 580 companies have proxy access in place, including 71% of the S&P 500 and 48% of the Russell 1000.

Proxy access should not be confused with a proxy contest, whereby a dissident shareowner circulates an alternative proxy card with a rival slate of board candidates. Proxy access involves only one proxy card, reducing the confusion and expenses associated with dueling cards. Another key difference is that proxy access has a substantial long-term ownership requirement, whereas any shareowner can launch a proxy contest. Also of critical divergence, proxy access accomodates only minor board tunrover (typically no more than two directors or 20 percent of the board, whichever greater); a proxy contest gives the nominating shareholder the option of pursuing a change-in-control. (Click to enlarge the image below.)

Shareowner access to the proxy has been standard practice for years in many countries, but not in the United States, where board elections are one-sided affairs: the company mails proxy ballots that list only its slate of nominees for board seats.

In 2010, Congress paved the way for a uniform proxy access mechanism by including a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act that reaffirmed the authority of the Securities and Exchange Commission (SEC) to issue a proxy access rule. In August of that year, the SEC approved a proxy access rule aimed at making it easier for shareowners to nominate their own candidates for director, but a lawsuit challenging the rule succeeded and the SEC vacated its proxy access rule before it had ever taken effect. Shareowners may, however, file shareholder proposals seeking proxy access on a company-by-company basis. Although non-binding, these proposals have spurred many companies to embrace proxy access through private ordering.

Resources & Advocacy
Shearman & Sterling 2018 Corporate Governance Survey
Proxy Access: Best Practices 2017

Proxy access bylaws  - company-specific details on access mechanisms gathered by Covington & Burling (last updated July 18, 2017)
Proxy Access by Private Ordering - summary of prevailing practices (February 2017)
Best Practices: Proxy Access (2015)

July 2, 2015 CII Letter to SEC on proxy related issues
Mar. 25, 2015 CII letter to SEC on Scope and Application of Rule 14a-8(i) (9)
Jan. 13, 2015 CII letters on proxy access to Chipotle Mexican Grill, Anadarko Petroleum, Apache, Arch Coal, Cabot Oil & Gas, CF Industries, Cimarex Energy, Citigroup, Cloud Peak Energy, Community Health Systems, ConocoPhillips, Domino’s Pizza, eBay, Exelon, Expeditors International, FirstEnergy, FirstMerit, Kohl's, Marathon Oil, Noble Energy, SBA Communications and YUM! Brands
Jan. 9, 2015 CII letter to SEC on proxy access at Whole Foods
Jan. 8, 2015 CII letter to Whole Foods on proxy access
March 11, 2014 CII letter to SEC on Draft Strategic Plan
Feb. 24, 2014 CII letter to Industry Canada regarding its Consultation on the Canada Business Corporations Act