New paper by Bernard Sharfman argues that:
Traditionally, the default rules of corporate and securities law have provided the Board with exclusive authority to decide whether shareholder proposals on proxy access are to be included in a public company’s proxy solicitation materials. However, the SEC has recently amended its rules to allow such proposals to be included whether or not a Board approves. This Article recommends that the SEC return to its traditional approach to proxy access and furthermore urges the SEC not to put mandatory proxy access back on its agenda. These recommendations are efficiency based as the Board, the locus of authority with the expertise and access to information that is not accessible to shareholders, is simply in the best position to determine whether or not proxy access is wealth enhancing for shareholders, not the shareholders themselves.
This Article makes three primary arguments. First, the SEC’s current regime of proxy access, by no longer allowing companies to exclude shareholder proposals on proxy access from their proxy solicitation materials, should not be understood as an enhancement to the “private ordering” of a company’s governance arrangements. Rather, this regime acts as a federal barrier to the more efficient approach of Board initiated proxy access and therefore should be rescinded. Second, the superiority of Board decision making in the context of proxy access creates a presumption that mandatory proxy access is an inefficient and unnecessary means of nominating and electing directors. Third, this presumption can be rebutted with sufficient empirical evidence. The null hypothesis to be tested can be stated as follows: the “preservation of managerial discretion” in the nomination of directors is wealth enhancing for shareholders. However, the empirical evidence does not currently exist to reject the null hypothesis or meet the requirements of Business Roundtable. In Business Roundtable, a primary factor in the Court vacating the SEC’s mandatory proxy access rule was a determination that the SEC failed to adequately consider its statutory obligations because it relied on “insufficient empirical data” in assessing “the economic effects of a new rule.” As a result, it would not be unreasonable for the SEC to keep mandatory proxy access off its agenda.
Sounds right to me.