SEC Advisors Reject Rule Change

WASHINGTON — Securities and Exchange Commission consultants on Tuesday recommended that the agency scrap a disputed proposal that would make it harder for investors to resubmit shareholder resolutions that were voted down.

The SEC plan is part of a broader commission proposal, issued in September, that seeks to balance shareholders’ ability to submit resolutions for a vote and companies’ authority to limit these proposals. Many of these resolutions deal with labor practices, executive pay and environmental issues.

The consultants, New York lawyer Ira Millstein and Columbia law professor Harvey Goldschmid, said the SEC should keep intact the part of its current rule that sets out requirements for shareholders who want to reintroduce proposals that have failed at previous annual meetings. The current rule requires that these proposals receive 3% of the vote to qualify for resubmission the next year, 6% the second year and 10% the third year. The thresholds proposed by the SEC would rise to 6%, 15% and 30%.

Unions and other shareholder groups had complained that increasing the thresholds would decrease the number of resolutions that make it to a shareholder vote.

The Business Roundtable, however, had asked the SEC earlier this month to increase the proposed first-year threshold to 10%.

Goldschmid and Millstein were appointed by the SEC last month to try to broker a compromise between firms and shareholder groups.