The Securities and Exchange Commission may let investors owning as little as 1% of the biggest companies nominate directors on proxy statements, giving stockholders a tool to overhaul boards at banking firms blamed for fueling the financial crisis.
SEC commissioners voted 3 to 2 Wednesday to seek public comment on the proposal, which would apply to companies with market values exceeding $700 million. Investors would have to own a larger proportion of shares to nominate directors at smaller companies.
The SEC is responding to investor complaints that directors are too cozy with executives and failed to block actions that led to more than $1.4 trillion of writedowns and losses at companies such as Citigroup Inc. and Bank of America Corp. Demands by labor unions and public pension funds to expand authority over corporate boards have stalled as a result of company opposition.
The proposal would let shareholders or investor groups with 1% of a company's shares for one year have their candidates listed on the proxy. The threshold would be 3% for companies with market values of $75 million to $700 million and 5% for firms with less.
Under the proposal, shareholders would face limits on how many directors they could nominate. If a board had three members, shareholders could recommend one candidate. If a board had more than three members, shareholders would be able to nominate candidates for 25% of the seats.